Curious about the SK10 measure for skew which I am not familiar with. Have always used the normalized 25RR for mainly floating skew products. If SK10 = (Vol(ATM) - Vol(ATM-10%))/sqrt(DTE)) is the correct formula, does this mean I am only taking one slightly OTM strike K that is 10% OTM (K/S = 90%), subtracting it's IV from the ATM IV, and then dividing by the square root of its time to expiry - doing this for each expiration in the term structure of one underlying for comparison sake. Does this also mean I am using the exact same OTM downside strike for each expiration if they all share the same underlying? Also, why use a strike, and only one downside strike, that as you go further out in time, is very close to the ATM (spot price S)? While other measures use both OTM call & put 25 delta point IVs, or the downside 1 standard deviation strike (OTM 16 delta put IV), and compares them or ratios them to the ATM IV. Not sure I see the value in SK10.
I miscalculated, a strike K that is 10% away from the spot can be significant. But using the same strike across different maturities with the same underlying will give you very different deltas across the term structure. With very a low delta strike closer to expiration, and obviously bigger deltas as you go further out in time.
SKEW is one of those things that makes a lot of sense only if you do not think about it much! (enhanced clarity and depth after some C2H5OH consumption)! {may actually be C9H16O2 -- some factors may be clouding my thinking}
https://www.elitetrader.com/et/thre...mma-vega-and-theta.228621/page-4#post-3381792">what is the best way to trade skew while hedging delta, gamma, vega, and theta?