The Skew chart in Equity Hub™ can signal that buying or selling demand for options is having a significant impact on options prices. While our other data reveals the options type & strikes wherein traders are positioned, the skew may signal as to if traders are buying or selling those options. Generally we believe when traders are heavily buying calls or puts, it increases the implied volatility for these options. If traders are heavily selling calls or puts, it may decrease implied volatility for options.

 

 

Our charts feature options delta across the x axis, and "Implied Volatility" (IV) on the Y axis. For options with a delta >=d50 (i.e. 50 delta) we select IV from put options. For options <=d50 we select IV from call options. The IV for d50 is an average of put & call options.

 

The green line shows the IV for options with ~30 days to expiration. The blue line shows options for the next available expiration. Lastly the dashed lines show yesterdays readings, for comparison. Again dashed green is the IV yesterday for options with ~30 days to expiration, and dashed blue is yesterdays IV for the next available expiration.

 

 

1) Neutral Skew: To start we have a fairly normal skew graph for SPY. Generally put options carry a bit of a premium to call options, and you can see this put IV steadily increases toward the left of our chart (ie d75 & d95). As the line shifts right towards calls (ie d25 or d10), IV decreases.  This makes sense as SpotGamma generally believes traders are on net selling calls, and buying puts.

 

 

2) Bearish Skew: Here we have put IV sharply higher than call IV. In this case traders were concerned that Coinbase (COIN) may have credit issues. This resulted in traders having high demand for put options which elevates IV.