The Implied Volatility skew is typically visualized at a given point in time. In this segment, we plot the volatility skew through time for a constant expiration date to observe shifts in skew.
We first look at the implied volatility surface for SPY to see traders’ perceptions of downside risks. Then, we extend the analysis to GLD to see how commodity skew differs from indices skew. In general, commodities exhibit call side skew as traders perceive greater upside risk.
Knowing that volatility skew differs across products empowers traders to sell more expensive options and generate greater vega as a percent of the option price.
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