Get started

Skewness

Skew IndexThe SKEW index is a measure of potential risk in financial markets. Much like the VIX index, the SKEW index can be a proxy for investor sentiment and volatility. The Skew Index measures perceived tail-risk in the S&P 500. SKEW values generally range from 100 to 150 where the higher the rating, the higher the perceived tail risk and chance of a black swan event. A SKEW rating of 100 means the perceived distribution of S&P 500 returns is normal and, therefore, the probability of an outlier return is small. Skew Index is at the lower end of its risk-range. Market doesn't appear to be hedging any tail risk
S
by RHTrading
Put Call Ratio/Volatility Skew CurveIn most mature markets, options can be a major indication on price direction, or at least the markets expectations of future market direction. One way of looking at this could be through the Call/Put Ratio. The ratio is a simple measure of how many call options are being traded relative to put options. As you can see from the chart above (www.sk3w.co) the peak of this ratio was ~16 on 2/2/2019, with another peak on 12/6/2018 of ~9.5. When looking at these dates respectively on the BTC price chart below, these heavy Call buying days were precursors to a $800 rally over a 22-day period, and a $1,000 rally over an 8-day period. As you can see from the Call/Put Ratio chart, today the ratio is roughly around the average of 1.95. Another good way of looking at options to get an indication on future price direction would be through the Volatility Smile or Volatile Skew. This skew will show the sentiment on the demand to buy or sell calls vs. puts. When a market has positive call skew, the calls will have a more expensive ‘implied vol’, and when the market has positive put skew, the puts will have the more expensive ‘implied vol’. Below is the Volatility Skew Curve for March, June, and September BTC options. While analyzing this chart over the last week after this volatile price action, we have not seen a major shift one way or the other in regards to this skew. If BTC were to be exiting this BEAR market, we would expect to see Call Skew form within this chart. If you are of the opinion BTC will rally, then buying call volatility would be a smart play. If the $4,200 RESISTANCE that has formed in BTC breaks to the upside, we would expect calls to go bid and see call skew form in the chart. As for now, through this analysis, we seem to be stuck in this $3,200-$4,200 range and therefore remain BEARISH. The ‘trend is our friend’, and will stick to this outlook until forced to do otherwise. To see our full article with all charts and figures attached, please check out: medium.com
COINBASE:BTCUSD
by BitOoda_LLC
Cross Ladder Quantitative Analysis ExampleUsing the Harmonic Mean (Pythagorean Means), we focus on "three values" using the Cross Ladder Problem by drawing the geometric shape - vectored R/S points. These values are taken from the harmonic mean of "B" "A" "h". The calculation inputs are Log Normal, Exponential, and Skewness. (Arithmetic mean gives higher data points that will error your weight); Harmonic Mean gives equal weight to each data point. This is in part; a computation set in our Optimal Geo-Ratio (OG) Model. One would want to incorporate the Intrinsic/Time Value to carry out the time horizon price target. We typically apply the STDEV*SQRT(45 days/252) equation to the two outcomes. You may use a short cut divisor 1/16 per incremental price input for jump diffusion if preferred, integrated with a Beta stochastic volatility model. Square Time Value and Excess Kurtosis are not shown in this example. Just remember volatility is the standard deviation of expected returns. Volatility is proportional not directional. Peace.
DShort
by Zentoro