Charm Pressure depicts how market maker hedging changes with respect to time and can be heavily influenced by large 0DTE volumes. Charm Pressure can be thought of as a key element in the pinning process that can be seen near positive gamma nodes.

Key Features

SpotGamma often finds that spot price tends to move towards zones where positive and negative charm meet at EOD. SpotGamma also finds that spot price moves strongly through blue zones at EOD in that process.  The Charm Pressure chart shows the following market maker positioning:

• Red Zones: Options are passively gaining value (sell more futures, less support)  
• Blue Zones: Options are passively losing value (buy more futures, more support) 

Trading with the Charm Pressure Heatmap

Towards the close of the trading day, monitor areas between blue and red pockets. Charm Pressure can have a considerable effect dampening hedging flows from areas of strong positive market gamma. This dampening action can lead to a pinning effect at EOD. 

• Pinning: Strong gamma interaction EOD (white/black, between red & blue)

If you are interested in learning more about TRACE, check out the full TRACE User Manual.

SpotGamma Alpha subscribers can access SpotGamma TRACE here.