How Do the Concepts of “Charm” and “Vanna” Exposure Influence Market Maker Hedging during a Gamma Squeeze?

Vanna measures how an option's delta changes with changes in implied volatility (IV), while charm measures how delta changes over time. During a gamma squeeze, as IV spikes (high vanna), market makers may need to buy more of the underlying asset to remain delta-neutral, adding fuel to the squeeze.

As options near expiry, charm can cause delta to rapidly approach 1 for in-the-money calls, forcing a large, final wave of buying from market makers. These second-order Greeks describe the subtle dynamics that can amplify the hedging feedback loop.