EXPLAINING SKEW

The 'tourist takes a shot at explaining skew through the lens of a market maker

You’ll often hear pundits talk about the “skew” in the option market. But what does that mean? And why does it exist?

It’s really not that complicated, so let’s go through it, and hopefully it will also help with your investing.

Let’s start by showing the implied volatility for 3-month options in the S&P 500 ETF (SPY).