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Options JiveWhat the Heck is Skew | Mar 3, 2020
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    Options JiveWhat the Heck is SkewMar 3, 2020

    Skew is where traders perceive the most risk. For example, for equities, the velocity of risk, and therefore skew, is to the downside because when markets drop, they drop much faster than they rise on average. For commodities, the velocity of risk is to the upside meaning that commodities tend to crash upward much faster than they drop to the downside.

    To determine where the risk of a market lies, look at the option chain and pick a delta of a put and call option. At the same delta, if the put is more expensive than the call, then that market exhibits downside risk. If the call is more expensive, the market exhibits upside risk.

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