Volatility Skew

I have traded options for a number of years and fully understand the “greeks” as should any active options trader.  When you understand options you realize how valuable of a tool they are for investing, managing risk and understanding market sentiment.  They are not as risky as many think.  Before I share a rather important chart, I think it is important to go over a few option basics to fully appreciate what the data is telling you.

Implied volatility (IV) is one of the most important elements of how an option is priced.  The simplest analogy is that of supply

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