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Feature Highlight: Quickly Access Product Overviews with This Week in Options (TWiO)

For a product specific overview of recent moves in volatility, open interest, and volume all in one place, check out This Week in Options under Market Dashboard → TWiO Report.

This Week in Options

This Week in Options

The symbols for the selected expirations with their respective expiration dates and days till expiry are on the left followed by the at-the-money (ATM) strike and future price. These columns also display their changes underneath the values.

The volatility columns display the ATM volatility, the risk reversal (RR) for the selected delta value, and the QuikSkew™ for the selected delta. The open interest and volume columns display totals, put/call ratio, and the most active contracts, all with changes.

 

QuikSkew ™: A Snapshot of the Vol Curve

You can think of QuikSkew™ as a snapshot of the shape of the volatility curve that normalizes for high/low volatility environments. The format is a number followed by the letter “P” and then another number followed by the letter “C” as shown here:

This example is from the TWiO Report, so the QuikSkew ™ measure on top (bold, blue text) is the current value and the measure on the bottom (normal, black text) is a historical measure such as prior day, prior week, etc. (specified by the user in the report controls at the top of the page). The values shown are for 25-delta options (also specified by the user). We’ll examine the current value – e. g. 24.5P-18.1c.

Interpreting QuikSkew™

The first value is the richness or cheapness of the puts to the at-the-money (ATM) volatility followed by the letter “P.” If the “P” is capitalized it indicates that the put volatility is rich to the ATM – e. g. the put volatility is greater than the ATM volatility – while a lowercase “p” indicates that the puts are cheaper – e. g. the put volatility is less than the ATM volatility. Therefore, the number, 24.5, with a capital “P” indicates that the 25-delta puts are 24.5% rich to the ATM. That is, if the ATM volatility is 10, then the 25-delta put volatility is

10 + 10 * 24.5% = 12.45

The second value is the richness or cheapness of the calls to the ATM, followed by either a capital “C” denoting that the calls are rich to the ATM or a lowercase “c” denoting that they’re cheap by comparison. In the above example – “18.1c” – the lowercase “c” indicates that the 25-delta calls are 18.1% cheap to the ATM volatility. Mathematically, if the ATM volatility is 10, then the 25-delta call volatility is equal to

10 - 10 * 18.1%  = 8.19

Change over time

The historical measure – “24.9P-20.1c” – shows that 25-delta puts went from being 24.9% rich vs. the ATM to 24.5% rich vs. the ATM – that is, the puts are less rich now than previously; while the 25-delta calls went from being 20.1% cheap vs. the ATM to 18.1% cheap vs. the ATM – that is, they are less cheap now than they were previously. We can imagine this as a flattening of the volatility curve when normalized for any changes in the ATM volatility level.