137: The Ultimate Guide To Option Skew & Volatility Smile

The Option Alpha Podcast

Kirk Du Plessis

Education, Options Trading, Trading, Investing, Stock Market, Business, Finance

4.8 • 1.2K Ratings

🗓️ 1 August 2018

⏱️ 36 minutes

🔗️ Recording | iTunes | RSS

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Summary

Show notes: http://optionalpha.com/show137 Implied volatility in option pricing is one of the most critical and yet least understood aspects of this business. Today show focuses on a deep dive into options skew and the volatility smile for both inter-month and intra-month option contracts. in addition, we'll talk very specifically about the impact of skew as expiration approaches and how Vega for near-term option contracts increases dramatically which can make it seem like option skew i...

Transcript

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0:00.0	You're listening to the Option Alpha Podcast from Option Alpha.com where we show you how to
0:06.2	make smarter trades learn how the stock market really works and generate consistent
0:10.8	monthly income. Now your your host, and head trader at option alpha.com, Kirk depluses.
0:17.0	Hey everyone, this Kirk here again from option alpha.com, working every single week to make this the most popular investing podcast offered online because it's based on one thing and one thing only and that's helping you guys make smart trades.
0:31.5	So again, thank you so much for tuning in today. On today's show we are going to be talking about option skew and the volatility smile that comes from option pricing both inter month and intram month.
0:43.7	And we're going to get really knee-deep into a lot of this volatility stuff, which I think
0:47.5	will help out not only just conceptually a little bit with understanding how markets pricing, but also understanding a little bit with understanding how markets pricing but also understanding a little bit
0:54.8	about the skew that's embedded in many equity and equity index options trading strategies.
1:01.2	So like I said, it's going to be a little bit more in-depth than maybe our typical or generic
1:06.4	podcast that we might do, but I think it's a topic that we haven't covered really anywhere in most of the training that we've done,
1:12.1	which is kind of actually
1:13.2	sad to say that at least at this point we haven't covered it that much and you'll
1:16.8	see why at the end why we don't cover it that much but is the topic that we have
1:20.3	not covered in-depth as much as we're going to do so here today.
1:23.4	So as always if you guys want to get some additional screenshots, some notes and some
1:27.3	commentary from today's show just head on over to option alpha.com
1:30.9	slash show 137.
1:32.6	Again, it's just the number 137.
1:34.2	All the show notes will be posted there
1:36.1	and all the details as well as the transcript
1:38.2	and the guides that you can download that go along with this.
1:41.8	So when we talk about Skew, the first thing I want to talk about is just this idea of a normal distribution market versus a skewed distribution.
	...

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