Skew Shape and How it Affects Options

Wayne

New member
Staff member
Most of you know me from the Sleep Well Portfolio and I am excited that so many of you have found a use for it. My other specialty is Options on Broad based indices and after talking to Tim Pierson we decided skew shape would be a fun topic. The recent highs in the SPX have created a huge skew shape disadvantage to options credit spreads over the short term. I am going to give a presentation on the subject on 12/3/20 with Tim on the Beginner's trading group. Before I do though I would love to hear if anyone reading this watches skew shape or uses a measurement of skew in there trading decision process? I look forward to talking more about this subject.
 

Chuck Moore

New member
A lot of us trade some type of Butterfly; Balanced, BWB, ATM, OTM etc. Although they are a combination of credit spreads, a look at how Vol Skew affects the different Butterflies would be interesting. And what tools you may use to show the skew curve and compare it over different time frames.
 

status1

Active member
I am not using the skew to make trading decisions since I don't see the correlation between the skew shape and individual option prices but I will watch the presentation and perhaps you can cover that topic

There are too many variables to make any decision on what option price to trade based on a certain skew shape which also varies in time so what may be a good entry at one point based on the skew shape it may not look so good when the market goes against the trade and perhaps the skew changes shape

I would consider the skew more like the VIX It's something to be aware off but not something that I would base a trade decision on
 

Marcas

Active member
Hi Wayne, I have been working with a SPX skew. I'm very interested in your approach. I hope I will be able to participate live in Tim's group meeting.
I managed to put some tools around this topic. One of it I, partially, presented in one of TG1 meetings. There was no interest from traders but I still think it provides valuable way in understanding how skew impacts different trading setups.
If Tim and you agree (and I'm available) we can use this tool in your 12/3 presentation or one of next ones. I think topic is worth spending more time on it.
 

Wayne

New member
Staff member
Hi Wayne, I have been working with a SPX skew. I'm very interested in your approach. I hope I will be able to participate live in Tim's group meeting.
I managed to put some tools around this topic. One of it I, partially, presented in one of TG1 meetings. There was no interest from traders but I still think it provides valuable way in understanding how skew impacts different trading setups.
If Tim and you agree (and I'm available) we can use this tool in your 12/3 presentation or one of next ones. I think topic is worth spending more time on it.
We would love to see what you use and find a way to incorporate it into the subject. PM Tim and he can set it up.
 

Marcas

Active member
Very good. I will try to find time to put new face to the program for easier presentation. I simply join the meeting unless you or Tim want to see it before - then we can talk in some quick Zoom, but again main idea was already presented on TG1.
(Again, I can't promise 100% that I will be able to participate live.)
 
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