Beyond gamma: DEX, VEX, CEX and second-order Greeks
Gamma exposure (lesson 3.4) describes how dealer hedging responds to price. But delta also changes when implied volatility moves and as time passes. Those effects drive some of the most reliable flows in the market.
The exposures
| Exposure | Greek behind it | What drives the flow |
|---|---|---|
| DEX (delta exposure) | Delta | How much dealers must hold right now to be hedged |
| GEX (gamma exposure) | Gamma: delta vs price | Hedging as price moves (lesson 3.4) |
| VEX (vanna exposure) | Vanna: delta vs implied vol | Hedging as implied volatility rises or falls |
| CEX (charm exposure) | Charm: delta vs time | Hedging as options decay towards expiry |
Like GEX, each is estimated by applying the relevant Greek to every open option, then aggregating across strikes and expiries under assumptions about who is long and short. The same caveats from lesson 3.4 apply: positioning data is imperfect and delayed.
Delta exposure (DEX)
DEX is the total delta dealers hold through their options book, and therefore how much stock or futures they hold against it. Large DEX shows how much hedging is sitting in the market and could unwind.
Vanna: when volatility changes
Vanna measures how delta changes when implied volatility changes. For out-of-the-money options, falling IV lowers their delta.
A common setup: investors own lots of index puts and dealers are short them. Dealers are hedged by being short futures. If implied volatility falls, say after a feared event passes uneventfully, the puts' deltas shrink, dealers need less hedge, and they buy back futures. That buying can push the market up, which lowers volatility further. This is the “vol crush rally” often seen after CPI prints or central bank meetings that go better than feared. It works in reverse when volatility spikes.
Charm: when time passes
Charm measures how delta changes with time. As expiry approaches, out-of-the-money options lose delta even if nothing else changes. Dealers hedging those options steadily adjust, creating predictable flows, especially in the days before monthly expiry. Once expiry passes, those hedges disappear, which is why markets sometimes change character after OPEX.
Other second-order Greeks
- Vomma (volga): how vega changes with volatility. Important for pricing far out-of-the-money options.
- Speed: how gamma changes with price. Explains why gamma risk can rise rapidly near big strikes.
- Color: how gamma changes with time. Explains the extreme gamma of 0DTE options.
How they are used
Traders combine these exposures to build a map of likely dealer flows: GEX for how price moves are absorbed or amplified, vanna for what happens if volatility shifts, and charm for drift into expiry. They are context for timing and risk, not standalone signals.
Key takeaway
Dealers hedge not just price, but volatility and time. Vanna and charm explain why markets often drift higher after fear fades and why behaviour changes around expiry.
Educational content only, not financial advice. Options involve significant risk and are not suitable for everyone.