Options Jive - October 13, 2021 - Skew and IV Correlation

Option skew can be intuitively thought of as the direction and magnitude of the underlying’s velocity of risk. For equities, this risk is to the downside whereas commodities see their velocity of risk to the upside.

The direction of the underlying’s velocity of risk can be determined by either looking at the symmetry of the option chain, or by observing the correlation between the underlying’s price and its IV.