The tastylive network The Skinny on Options: Abstract Applications - November 10, 2025 - Negatively Skewed Markets
Nov 10, 2025
Hosts discuss the significance of negative skew for premium sellers, emphasizing downside risks. They explore how kurtosis and skew interact in markets, leading to more frequent extreme price movements. Tony critiques the barbell strategy for hedging tail risk, while Jim breaks down skew types and their impacts on distributions. The team offers practical advice on managing downside exposure and executing profitable hedges. Additionally, they highlight how market participation inherently involves risk, and large downturns often recover through multiple smaller rallies.
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Fence Repair After Hurricane Delays
- Jim shared a personal story about finally fixing his hurricane-damaged fence after delays for roof repairs.
- He joked the fence felt as pressured as trading decisions and celebrated getting it done.
Kurtosis Explains Frequent Large Moves
- Markets show positive kurtosis, meaning large moves occur more often than a normal distribution predicts.
- Combine that with negative skew and downside outliers become more frequent and damaging.
Negative Skew Favors Big Downside Moves
- Negative skew shifts the distribution so the left tail stretches further than the right tail.
- That makes extreme downside moves rarer but more severe and more likely than equivalent upside moves.
