Skew you! :-D

April 9th, 2023, 05:17 PM

Hi guys and gals,

I am trading options for 1–2 years now. Started out with Cash secured puts and covered calls. Nowadays, I am trading vertical credit spreads for the most part and sometimes iron condors.
I am mostly focusing on uncorrelated ETFs/equities that have high IV and that I have a directional opinion. For strategy, I am doing (quite conservatively) 30-40 dte 15-11 credit spreads. (I read the Options Traders Hedgefund and really liked it)
Since I want to trade more Iron condors (and additionally it should help me set the width of the spread) I want to focus more on skew.

I understand that it is advised to check the skew of lets say the next three monthlies and see how the IV of f.e. the 15 delta puts relates to the atm put.

Firstly, I need my broker to show me that. They just show me the comparison for one strike price but not delta related (but that is an issue on its own :-D I am with IBKR).

Secondly, I am not sure at which point a skew is viewed as flat or steep. Are there generally accepted percentages, or does it just relate to the past ratio?

Thank you very much and kind regards
Matache

April 15th, 2023, 03:59 PM

I MIGHT be able to help.

Not sure what the issue is that you have with IB. I'm looking at "Option Trader" screen and have all of the Greeks for each strike displayed. (More on this later)

Second "flat" means that there is no difference between the distance from ATM for an OTM Call and the OTM Put at the 15 Delta strike. For example: ATM is 319/318 and the APR21 '23 326 Call Delta = .146 The distance between 319 and 326 is 7. Seven strikes from ATM on the Puts the Delta = .177 so the skew "favors" the Puts.

Maybe you are already at that point and are talking about wanting the IV for each strike. Using IB I only find the IV at a particular strike if I load an order and then I find the IV under the (you guessed it!) the "Volatility" column at the top of the "Options Trader" screen (see the attached image).

If you are trading Options exclusively, imho you should check out TastyTrade.com

April 15th, 2023, 04:02 PM

Skew is simply the relationship between the implied volatilities of various options. Vertical skew refers to the options in the same expiration. Horizontal skew refers to different expirations of the same strike.
TWS has the ability to display these and here are some links to get started:
https://ibkrguides.com/tws/usersguidebook/mosaic/vollab.htm
https://ibkrguides.com/tws/usersguidebook/mosaic/volatilityskew.htm

April 15th, 2023, 04:18 PM

Bookworm

Skew is simply the relationship between the implied volatilities of various options. Vertical skew refers to the options in the same expiration. Horizontal skew refers to different expirations of the same strike.
TWS has the ability to display these and here are some links to get started:
https://ibkrguides.com/tws/usersguidebook/mosaic/vollab.htm
https://ibkrguides.com/tws/usersguidebook/mosaic/volatilityskew.htm

Thanks Bookworm. I figured IB would provide the info somewhere but I'd never had a burning need so.... Thanks for the links

Skew you! :-D

Discussion in Options

Skew you! :-D