Why is option skew considered an important indicator for cryptocurrency investors?

1 answers

• Nov 25, 2021 · 3 years ago
  Option skew is an important indicator for cryptocurrency investors because it provides insights into market expectations and potential risks. It reflects the difference in implied volatility between call options and put options, indicating the market's perception of future price movements. A positive skew suggests that investors are more concerned about potential price increases and are willing to pay a higher premium for call options, indicating a bullish sentiment. Conversely, a negative skew indicates that investors are more worried about price declines and are willing to pay more for put options, indicating a bearish sentiment. By analyzing option skew, investors can gain valuable information about market sentiment and adjust their investment strategies accordingly. It can also be used as a tool for risk management, as high skew values may indicate increased market volatility and potential downside risks. However, it's important to note that option skew should be used in conjunction with other indicators and analysis techniques for a comprehensive assessment of the market.
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