The tastylive network The Skinny on Options: Abstract Applications - November 10, 2025 - Negatively Skewed Markets
Nov 10, 2025
The hosts dive into the nuances of negatively skewed markets, elucidating its impact on premium-selling strategies. They explore how kurtosis reveals the frequency of extreme market moves and differentiate risks between single-name equities and indices. Strategies like position sizing and tail hedges are discussed to mitigate risks from downside outliers. The panel also shares insights on managing volatility and suggests using static short delta to better brace for downturns. Key takeaway: premium sellers must carefully navigate pronounced downside tail risks.
AI Snips
Chapters
Books
Transcript
Episode notes
Fence Repairs After Hurricane Damage
- Jim shares a personal story about finally fixing his hurricane-damaged fence after months of delays.
- He connects the fence repairs to household pressure and prioritization of other fixes like the roof.
Downside Tail Risk Dominates Markets
- Markets show both positive kurtosis and negative skew, meaning more frequent outliers and larger downside tails.
- This combination makes large downside moves more common and damaging than equally large upside moves.
Skew Differs Between Stocks And Indexes
- Single-name equities often show upside call skew while broad indices show put skew reflecting aggregated downside risk.
- You can balance a portfolio by exploiting calls on individual names and puts on indexes for theta income with offsetting directional bias.
