During or after OPEX Vanna and Charm can have an effect on the price action. They can explain why we see strong moves in the market.

1. The Mechanics of Normal OPEX: A Stabilizing Dance

Market makers aim to remain delta-neutral. During typical trading sessions, they constantly buy or sell the underlying asset (or index futures) to hedge their net exposure from the options they’ve sold to customers. Two lesser-known Greeks—vanna (how delta changes with implied volatility) and charm (how delta changes over time)—help smooth out price movements.

  • Vanna: If implied volatility changes, an option’s delta can shift significantly, prompting hedging flows.
  • Charm: As time passes, delta can naturally decay (for OTM options) or rise (for ITM options).

These factors function like shock absorbers on a car, ensuring day-to-day volatility doesn’t spin out of control. As a result, even if the VIX jumps intraday, the presence of robust hedging flows usually counters excessive swings—at least to some degree.

2. Post-OPEX: The Disappearing “Shock Absorbers”

When options expire, many of the positions that market makers had been hedging simply disappear. If they don’t roll into new contracts, the entire hedging dynamic changes. It’s as though the market’s shock absorbers have been removed.

  • Pre-Expiration Hedging: Before OPEX, large open interest at certain strikes can create pinned markets; dealers offset bullish or bearish flows with near-equal and opposite trades.
  • Post-Expiration Void: Once those options are gone, so is the dealer hedging that went along with them. If the VIX spikes now, there’s no preexisting hedge pressure to cushion price moves, so volatility can spiral higher more easily.

3. Speed, Vanna, Charm, and Skew: The Volatility Amplifiers

Speed (Second-Derivative of Gamma)

Speed measures how an option’s gamma changes as the underlying price moves. If market makers are effectively “long speed,” they might see their gamma increase when the market runs in a certain direction—pushing them to buy into rallies or sell into dips, which can fuel feedback loops and amplify price action.

Vanna

Vanna focuses on delta’s sensitivity to implied volatility. In a rising-vol environment, short put positions see their deltas climb, compelling dealers to sell more underlying—pressuring the market further. Conversely, when vol cools, those put deltas drop, and dealers buy back short hedges, stabilizing or lifting the market.

Charm

Charm is about delta’s change with respect to time. Typically, if many out-of-the-money puts remain out of the money, delta decays, and dealers buy back short hedges over time (the “charm bid”). That can help keep markets buoyant. But if the puts are in the money or the market is under pressure, delta might rise instead, causing dealers to increase short hedges as time passes (a more bearish flow).

Skew Structure

In equity markets, put options commonly carry higher implied volatility than calls, reflecting consistent demand for downside protection. However, sometimes investors “short the skew,” meaning they buy calls and sell puts. This has repercussions for how dealers hedge. If the market rallies under these conditions—and implied volatility also rises—both SPX and the VIX can climb together, creating an odd spectacle of rising prices and rising implied volatility.

4. When SPX and VIX Rise Together: The “Short Skew” Scenario

Typically, SPX goes up and VIX goes down (and vice versa). Yet in certain cases, you’ll see them moving in tandem. Why?

  • Traders Overly Bullish: If many traders buy calls and fund that by selling puts, they create a situation where market makers end up “long the skew” (i.e., short calls and long puts from the dealers’ perspective).
  • Volatility Feedback Loop: As spot price rises and implied vol stays elevated—due to a risk event or ongoing uncertainty—every incremental move higher can force dealers to hedge in ways that push vol up further.
  • Liquidity and Vega: If vega (sensitivity to implied volatility) and gamma remain high, even a modest push can keep the market pinned in a high-vol, high-price environment, especially if new call-buying flows continue.

5. Why Timing Matters: Post-OPEX Volatility Shocks

A VIX spike any time can cause ripples, but when it occurs after OPEX, the impact can be magnified. With fewer existing options positions, there are less offsetting flows. Markets can experience bigger air pockets or vacuum-like moves, as no built-up “long gamma” positions remain to counter directional surges or slides.

  • Expensive Premiums: If the VIX jumps post-OPEX, option premiums can stay costly for weeks, and the market can experience see-saw moves.
  • Rapid Market Swings: In the absence of hedging flows, modest triggers can produce large intraday waves. The market effectively trades without a net.

6. How “Short the Skew” Builds Positive Gamma Growth

When traders repeatedly buy calls and sell puts (short the skew), it can tilt the market in a way that fosters a rising SPX and rising VIX scenario. Market makers get forced into positions that, as spot moves higher, push them to buy the underlying to hedge the calls and maintain or elevate implied volatility on the put side. This can create a feedback loop—until liquidity thins or an exogenous event halts the rally.

  • Example: A major upside push can lead to a near “blow-off top,” with both SPX and VIX spiking. Then, if sentiment flips or profits are taken, you might see SPX slip while VIX also falls, as fewer new positions are opened.

7. Key Concepts to Review: Speed, Vanna, Charm, and Skew

  • Speed: The rate of gamma change with price. High speed can accelerate moves in either direction.
  • Vanna: Delta’s sensitivity to implied volatility. Rising vol forces more hedging in the underlying if short puts exist.
  • Charm: Delta’s sensitivity to time. As expiration nears, short OTM puts often produce a “charm bid,” but if puts are ITM, dealers might sell more underlying instead.
  • Skew: The pattern of implied vol across strikes. Traditional equity skew has higher IV for downside puts. “Short the skew” means traders are flipping that dynamic by buying calls and selling puts.

8. Putting It All Together: Plan Your Trades Around Expiration

  • Post-Expiration Traps: If you see a VIX spike in the first few days after OPEX, it can trigger a cascade of volatility without the usual stabilizing flows from dealers.
  • Hedging Gaps: When big put or call positions vanish, so do the offsetting hedges. That can expose the market to more dramatic moves—both up and down.
  • Watching Skew Behavior: Keep an eye on whether traders are piling into calls or puts. An overabundance of bullish call-buying (funded by put-selling) can paradoxically raise volatility alongside price.

9. No Free Lunch: VIX & SPX Can Uncouple Rapidly

Remember that while the S&P 500 and VIX typically move inversely, pockets of time exist where they sync up on the upside or the downside. Post-OPEX weeks are fertile ground for these anomalies, as the market resets positioning. Knowing when big open interest has just expired can help you anticipate bigger, wilder swings.

Conclusion: Timing Is Everything, Volatility Is Key

Markets have their own rhythms, and OPEX is one of the most important beats. Leading up to expiration, dealer hedging flows can dampen volatility. But once that event passes, if the VIX suddenly spikes or traders “short the skew,” the lack of hedging “shock absorbers” can send the market on a wild ride. Understanding concepts like vanna, charm, and speed—and keeping a close eye on skew structures—puts you in a better position to anticipate when the S&P 500 might break its usual correlation with the VIX, how implied volatility can stay elevated, and why timing around options expiration can make all the difference in your trading strategy.

Whether you’re bullish, bearish, or neutral, the week following OPEX is often one of the most crucial times to tighten risk management, watch for abrupt price swings, and remember that missing shock absorbers can turn mild catalysts into volatility storms. As always, stay aware of macro developments and liquidity conditions, since no Greek can offset a major fundamental surprise. But for those who pay attention, the post-expiration window offers a unique lens into how modern market mechanics, second-order Greeks, and liquidity flows interplay—and potentially create the next big move.