Calling All Fans!

We're letting tastynation call the shots! Give us your trade idea or let us solve your problems.

Submit

Market Measures

Monday – Friday | 9:00 – 9:20a CT

SKEW into the Strength

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The SKEW index is a measurement of the perceived tail-risk in the market and it is also a proxy of the steepness of the volatility "smile." The steepening of the volatility smile can push up the skew index.

Today, tastytrade examines extreme skew on the performance of short positions. The historical mean of the skew index is 118 and its standard deviation is 6. So, a 130 skew index is two standard deviations from its mean, and generally, we can conclude the 130 or higher skew index as an extreme.

The average P/L and success rate of selling a 16 delta 45 DTE put on SPY when skew is greater than 130 or 140 are much higher than the average P/L of all markets

Therefore, extreme peaks in the skew index and the steepening of the volatility smile can be utilized by selling OTM puts or put ratios.

Market Measures More installments

See All »

Latest tastytrade Videos As of July 17

Most Shared From the last 30 days