Option skew in crude seems excessive

Discussion in 'Options' started by heech, May 26, 2010.

  1. heech



    There's always been option skew, but the recent movements has really accelerated that skew.

    OTM puts for July crude has IV at ~43%, while OTM calls are ~37%.

    Looks like people are still very concerned about another leg down.
  2. I have no idea what this means, but it sounds interesting. Care to explain for us n00bs?
  3. skew is simply the vol slope for otm options where is an otm (out of the money) option trading in relation to the at the money in vol terms...example atm is 30%vol otm call is 40% and otm put is 50% the otm put has a higher skew than the otm call...you could assume people want the puts more. This is usually the case in the stock market where people are usually long and want to protect themselves to the downside. IN Crude, maybe the bearish fundamentals, I'm not sure why exactly this may be at the moment...
  4. livevol_ophir

    livevol_ophir ET Sponsor

  5. 1) Crude oil appears to be trading more like a financial commodity instead of like a physical commodity when the skew looks like that. Then again, there's just so much more speculative money in there compared to years past. :eek: :( :cool:
    2) The market can also get "weird" around the Memorial Day weekend too. :cool:
  6. Does adding lots of emoticons make a post more credible? :confused: :D :cool: :p :eek: :)
  7. You may be "right". Anything more than two can be excessive. :)