Does the smile flatten or get steeper after volatility increases?

Discussion in 'Options' started by Sig, Nov 13, 2016.

  1. water7

    water7

    there is no "fixed rule" on how vol skew will behave in certain condition
    they are simply reflecting demand and supply from all market participants

    during high volatility periods:
    - front month vol skew can rise (vertically) and steepen at the same time
    ex: pre-election
    - or it can rise and flatten
    ex: second day post-brexit
    - or it can fall and flatten
    ex: early morning on nov 9th

    trader can monitor vol skew changes via IB volatility lab or other vol platforms
    how it changes through the days..
    how it changes relatively to other expirations..

    after a while, trader may develop a general idea/ bias on how vol skew likely to behave
    and then use the information to improve one's trading setup / existing positions

    :]
     
    #11     Nov 13, 2016
    SMA and cdcaveman like this.
  2. Well put...supply and demand
     
    #12     Nov 13, 2016