Today's research segment was about how option skew reflects the direction of risk velocity in different assets. The study analyzed SPY, IWM, UNG, and GLD over 10 years using 16-delta strangles with 45 DTE managed at 21 days.

Results confirmed that skew accurately indicates potential risk direction. SPY and IWM showed put skew matching their downside risk, while UNG and GLD displayed call skew aligning with their upside risk potential.

Interestingly, SPY showed larger upside outliers than downside ones, likely because markets must rise more percentage-wise after a decline to reach previous levels. The study reinforces that option pricing reflects rational expectations expensive puts or calls signal where explosive moves might occur, not necessarily market direction.