The Market Is Pricing Risk to the Upside. In 8 Years of Trading This Has Never Happened Before

Why It Matters

Call skew signals that market participants expect further upside, offering traders higher option premiums but also heightened risk of a sharp reversal, making strategic delta management essential.

Key Takeaways

• Call skew appears, indicating market pricing upside risk.
• SPY hits all‑time high, driven by post‑holiday gap.
• Put premiums cheaper than calls, reversing typical skew pattern.
• Trader suggests selling OTM calls to capture higher credit.
• Manage delta exposure carefully amid potential blow‑off top.

Summary

The video highlights an unusual options market condition: call skew, where call premiums exceed put premiums, signaling that traders are pricing risk to the upside. The host notes that the S&P 500 (SPY) has just jumped to a new all‑time high after the three‑day weekend, a move he describes as “dirty” but typical of the volatility under the current administration.

By examining the June 18 expiration chain, he shows the at‑the‑money strike around 748‑749. Five points out, the 743 put trades near $8.22 while the 752/753 call trades just over $9, making calls roughly a dollar more expensive than puts. This reversal of the usual put‑skew pattern suggests the market expects a stronger upside move and is willing to pay a premium for that exposure.

He cites the adage that markets “stair‑step up and take the elevator down,” but currently the “elevator” appears to be pointing upward. To capitalize, he sells out‑of‑the‑money July calls (e.g., 755 strike) for about $1.69 credit, giving a break‑even near 754‑755 and a 20‑25‑point cushion if the rally continues. He stresses trade‑management, noting that 90 % of trading success comes from handling positions, especially when delta exposure is mixed.

The takeaway for traders is to watch for call skew anomalies, which can provide richer option premiums and inform delta‑balanced strategies. However, they must remain cautious of a potential blow‑off top and adjust portfolios accordingly, balancing long and short delta to avoid being caught on the wrong side of a rapid pullback.

Original Description

Put skew is normal. Call skew is not. Right now SPY calls are pricing in more risk than equidistant puts, and that is something worth paying attention to.

The host breaks down how to spot call skew in real time using the options chain, what it actually means when the market prices velocity of risk to the upside, and how to take advantage of it when selling premium. Then a live trade: selling the QQQ July 755 calls for a $1.69 credit, with 20-25 points of cushion above the current price and call skew working in your favor on order entry.

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CHAPTERS:

0:00 What Is Call Skew

0:28 Market at All-Time High

1:14 How to Spot Call Skew

2:09 What Call Skew Signals

2:40 Portfolio Position Review

3:44 QQQ Call Spread Setup

5:56 Live Fill at $1.69

6:47 Key Takeaway

#callskew #optionstrading #putskew #ifistartedtradingtoday #qqq #optionsstrategy #tastylive #impliedvolatility #bearcallspread #optionsforbeginners

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