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Gold Options and Call Skew

Market Measures

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Gold is a relevant market at the moment with its run to the highs. When this happens, gold options tend to see call skew (which is present 75% of the time). So how do gold strangles perform when there is call skew vs when there isn't call skew?

Study:
  • Compared profitability, strike distance, and distribution of losses for 1 standard deviation (16 delta) strangle in Gold (GLD) in all environments and when Gold had call skew
  • 45 DTE options
  • All data taken at expiration
  • 2008 to present

We find that in every scenario, short strangles have been profitable. When call skew was present, performance was enhanced. Since GLD calls tend to be more rich than puts, calls on average made more money than their corresponding delta puts.

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