FreeSPY3 min read
Skew is cheap for the first time this year
SPY
Delayed
The thesis
Put skew has compressed to the bottom of its two-year range while the index sits near highs. Protection is cheap precisely when nobody wants it.
What I'm watching
- 25-delta put skew percentile
- Term structure of skew, not just level
- Dealer positioning into monthly expiry
Positioning
Long, 4-8 weeks. Conviction: Medium. Long premium bleeds. Budget the theta before you put it on.
Opinion, not investment advice. The author may or may not hold positions discussed.
Opinion. The author may or may not hold positions discussed. Not advice. Not a financial promotion approved under FSMA s.21. Quote data is delayed. Past performance is not a reliable indicator of future results.
Comments
7 commentsThis lines up with what I'm seeing in the SPY tape.
Good question. I'd size it at a third until it confirms.
Good timing — was just reworking my SPY sizing this morning.
Counterpoint: positioning is already crowded on this. The edge is thinner than it looks.
Depends entirely on where you put the stop, I think.
Same read here. The risk is it takes longer than anyone wants.
Exactly — that's the invalidation I'd use too.