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SKEW

SEXY TANTRIC SYMMETRY ENDS BEFORE SWITCHING TO HOT NEW POSITION This is a deliberately simple chart. This distorted and skewed symmetry from recent months seems to be coming to an end soon. It is by no means a reliable precedent but the last time symmetry from the March high ended we set our medium-term bottom down in the mid-6's and travelled to knock on the 10K ceiling- some swingers more than doubled their money just by holding ETH or BCH for a month. This is an interesting and bizarre pattern to look at because finding the middle of it (ironically, the middle was around 6/6) seems to dictate where something will eventually shift and change by tracing the patterns to its end. Is it completely meaningless? I don't know. I tend to think that the February bottom was too quick / merely a test, the April bottom was barely enough accumulation and if this does end up being a bottom soon it may give us sideways action lasting longer than we expected... which could also lead to failure and capitulation instead of another prolonged rally. I'm sharing this only because I see it.. not because it gives me direction. No advice here! Just some fun ideas as everyone is now wanting to turn bullish. I do believe we deserve more accumulation in the 4-7K range before any sort of legitimate bull run can occur but don't assume we're going to get it. I am very open to to seeing this becoming a bottom. Is there anything better than a swinger showing you his or her bottom? ;)
BITFINEX:BTCUSD
by AriaDayman
S&P500 SPY YEAR-END OPTIONS GRAPHEDWith the S&P500 ($SPY) at 215.04 last as of Friday, October 7, 2016, you can see the price of various options. I started at 215 which is "at the money" and the prices above that are the call options, since those are "out of the money". I made the call options green, since they are for upside price action. I then graphed the put options prices from 215 and down and made them red, since they are for downside price action. What you can see is that it costs a lot more to protect against a market decline than it does for a rally. In fact, if you had $1.65-$1.70 to spend on a CALL option, you could get one that was 3.2% out of the money. But if you bought a PUT option instead, you'd have to get one that was 9.3% out of the money, which is ALMOST 3 TIMES FURTHER OUT OF THE MONEY. Basically speaking you'd have to monitor this every day to see what was a "normal" amount of skew, or price difference between puts and calls that are out of the money. But I think you can see that this is a pretty extreme reading at first glance. The fact that they are different in price is more of a function of how people use options and who initiates the trade to price the option. Let's walk through the basics: A put buyer enters an order to buy a put, which gives a put seller the chance to sell. Once the transaction has occurred, the "put seller" generally would prefer to neutralize the position by either selling short a fractional amount of the index, or go out and purchase other put options to hedge off the risk. So after awhile, a market for options that looks like this would imply that a lot of hedging has taken place and nervous longs and bearish speculators have already built their positions and are protected against a market decline. What I would also expect out of an extreme reading like we have now, is that any sharp decline would find a bottom quickly because the hedges are already in place. This is not to say that we can't have any declines, but you wouldn't expect to see a cascading decline or a massive collapse with this much hedging already in place. It looks to me that the market will more likely edge higher to the 220-225 area into year end as a much more likely possibility to the 198-206 area. The odds are better than 2:1 that this is true, from the way that I see it. Have a great weekend and hope to continue doing this analysis each weekend until it shows a bearish signal. I'll be in KEY HIDDEN LEVELS chat room during the week if you have any questions or feel free, of course, to post questions here. All the best, Tim
AMEX:SPYLong
by timwest
29
Black Swan Risk Canary, CBOE Skew Index Similar to VIX, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible. As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns become more significant. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the skew.
S
by QuantitativeExhaustion
23