🌀 Prices Analysis / Skew Chart

Implied volatility skew for Brent Winter-25 69/77 Calls

📝 Description

This chart captures the volatility skew, showing the difference between the implied volatility of a selected leg and that of the at-the-money (ATM) strike over time. It is a critical tool for understanding directional sentiment, risk asymmetry, and pricing dynamics.

Key Use Cases:

• Sentiment Gauge: Identify market preference for downside vs upside protection.
• Skew Trading: Support construction of trades targeting mispriced wings (e.g., risk reversals).
• Relative Value Monitoring: Detect changes in shape or slope of the skew over time.
• Risk Premia Analysis: Evaluate the premium embedded in OTM options relative to ATM.

🎛️ Interactive Controls

• Contract - Defines rollover logic for maturities
  • Rolling - Roll option to maintain similar contract for extended history.
  • Fixed - Track full history of selected option.
• Trade Leg  - Chooses the specific option series
  • 77 Win-25 / 69 Win-25 - All single legs of selected structure.
• Granularity - Sets resolution for the summarisation. If > Days Granularity will be selected, data will be aggregated for this period.
  • Days
  • Weeks
  • Months
  • Quarter
  • Half-Year
  • Year

📌 Chart Components

Time-Series Panel (Left)

• 🔵 ATM Implied Vol – average volatility at the at-the-money strike.
• 🟢 Local Implied Vol – implied volatility at the selected trade leg’s strike.
• Histogram - Visualises the difference between local and ATM IV
  • Skew = ATM IV - Local IV

Distribution Histogram (Right)

• Histogram - Histogram of Skew for the selected time range
• Bar Colors - Light teal = Older data, Dark blue = Recent data
• Average Line - Dashed horizontal line shows historical average
• Last Line - Most recent Skew.
• Percentile Marker - Current Skew is in the X% percentile

• Timeline & Mini-map (Bottom):

• Zoom Control - Drag to isolate specific time windows
• Mini Map - Full range of Underlying and IV / Price history
   

📚 Data Sources

• ATM Implied Volatility: Derived from interpolated implied vol for the strike closest to current underlying price.
• Local Implied Volatility: Corresponds to the selected leg's strike IV.
• Skew Calculation: Simple difference between Local IV and ATM IV.
• Distribution Data: Full time series used to compute percentiles and histogram.

🧩 Interpretation Tips

• Positive Skew: Local strike has higher IV than ATM → indicates higher pricing for tail events (e.g., demand for OTM puts).
• Negative Skew: Local strike has lower IV than ATM → suggests lower perceived risk or lack of demand for tail protection.
• Low Percentile (e.g., 0%): Current skew is historically extreme — may suggest a potential mean-reverting opportunity.
• Sudden Spikes/Drops: Could signal structural shifts, such as upcoming macro events or stress.