What Is Skew in Options and How to Trade It

# What Is Skew in Options and How to Trade It Most traders are unaware that options skew could be the secret weapon they need to amplify their trading performance. In fact, studies reveal that a staggering **93% of retail traders lose money**. The remaining 7% utilize strategies like options skew to find the hidden edges in the market. Want to be part of that elite group? Then keep reading to bridge that curiosity gap! ## What Is Options Skew? Options skew, often referred to as volatility skew, represents the difference in implied volatility (IV) across various strike prices and expiration dates for options contracts. If you’re trading options without understanding skew, you might as well be tossing darts at a wall. Recognizing skew allows you to grasp how market participants perceive risk in the underlying asset. But why does options skew matter? Different strike prices imply different levels of risk and reward, affecting your potential gains or losses. For example, consider an equity like **SPY (S&P 500 ETF)**. The skew might show that out-of-the-money puts are trading with higher IV than out-of-the-money calls, indicating that traders expect a downward move in the underlying price. ### How Does Options Skew Affect Your Trading? Every day that passes without understanding options skew translates to missed opportunities. It’s a form of **mental tax** you impose on your trading strategy. By ignoring this critical element, you could be throwing away profits, not to mention your sanity. For instance, analyzing **AAPL (Apple Inc.)**, you might find that call options have a significantly lower implied volatility than puts. This informs you that the market is pricing in more risk for a downturn than for an upturn, a critical insight that can tilt the scales in your favor. *Read that again: Ignoring options skew leaves you vulnerable to market traps.* ## Why Should You Care About Options Skew? Many traders dismiss options skew as a complicated phenomenon best left to inst