{"id":40890390,"date":"2023-11-08T11:30:59","date_gmt":"2023-11-08T06:00:59","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890390"},"modified":"2023-11-08T11:30:59","modified_gmt":"2023-11-08T06:00:59","slug":"skew","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2023\/11\/08\/skew\/","title":{"rendered":"Skew"},"content":{"rendered":"\n<p>Our <a rel=\"noreferrer noopener\" href=\"https:\/\/stockviz.biz\/2023\/11\/03\/the-smirk\/\" target=\"_blank\">previous post<\/a> discussed how the implied volatility (IV) of OTM puts are often higher than the IV of OTM calls. We would like to add that this &#8220;smirk&#8221; is very much warranted &#8211; it is <strong>not<\/strong> an invitation to sell OTM puts. Returns of financial instruments often have negative skew &#8211; a fancy way to say that they often take an escalator up, and an elevator down.<\/p>\n\n\n\n<p>Here are the daily and weekly return skews of the NIFTY 50 TR index and the SPY ETF:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/volatility\/iv-strike\/daily.skew.density.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/volatility\/iv-strike\/weekly.skew.density.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>The market is willing to pay up to hedge against this risk. If you sell the skew, you&#8217;ll have to hedge against it by some other means. Otherwise, it is like picking up pennies in front of a bulldozer.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Our previous post discussed how the implied volatility (IV) of OTM puts are often higher than the IV of OTM calls. We would like to add that this &#8220;smirk&#8221; is very much warranted &#8211; it is not an invitation to sell OTM puts. Returns of financial instruments often have negative skew &#8211; a fancy way &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2091813,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[1150],"class_list":["post-40890390","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-volatility","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890390","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=40890390"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890390\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2091813"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890390"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890390"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890390"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}