Modelling skew dependent on vol of vol

Discussion in 'Options' started by MrMuppet, Oct 7, 2021.

  1. LM3886

    LM3886

    I understand that this is due to sticky delta, but do you have a condition for this to happen in general? Low IV levels? I often observe OTM vols to drop with the overall vol level when index goes up. For example, the overall IV curve for SPY goes down as SPY rises, from the blue curve to the red curve (vertical lines are SPY prices): newplot.png
     
    #51     Oct 13, 2021