What is Vanna?

Vanna is the change of delta with respect to a change in volatility, or a change in delta with a change in volatility. When IV rises, the spread of delta gets wider, and vanna measures that. It is the same for both calls and puts, and changes accordingly.

You can visualize this in the Unusual Whales Vanna and Vanna Exposure tool. Above, we’re set to 3DTE, but you can set this to 0DTE, or any expiration date you’d like. Here, we see that Net Vanna Exposure for $QQQ for the 3/26/2024 is highest at $460. The Net Put and Net Call Vanna Exposure sits at $455; remember, Vanna functions the same for Calls and Puts; only Vanna for calls is positive, and Vanna for puts is negative. 

So, what does this mean?

When Vanna decreases, it’s an indication of how much the Delta of an option contract will shift in response to changes in the Implied Volatility. However, recognizing and interpreting this direct impact of Delta from a drop in Vanna necessitates an understanding of the context; whether IV increases or decreases, and what type of option contract is analyzed (call or put).

In scenarios of escalating implied volatility, a positive Vanna would amplify delta for a call option while diminishing it for a put option. Conversely, a decrease in Vanna (indicating reduced delta sensitivity to implied volatility changes) would result in a less pronounced alteration in delta compared to a scenario where Vanna remained high.

In regards to Delta: Delta spans from 0 to 1 for call contacts, and from -1 to 0 for put contracts. With positive Vanna, heightened implied volatility could bolster delta for calls (nearing 1) and diminish it for puts (nearing -1). Conversely, a decrease in Vanna suggests a dampened delta sensitivity to implied volatility shifts. Consequently, given a similar shift in implied volatility, the change in delta would be less significant.