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Choosing a Volatility Skew

Selecting the “Modify Skew” field in a parameters menu displays the Volatility Skews menu:

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This menu displays the current volatility skews for strategy S1 of the option chart. Other skews may be available. We will take a look at choosing alternate skews in the next section. The Volatility Skews menu contains the following fields:

Field
Function
Options
Identifies the symbol root and expiration month of the options to which the skew is applied.
Instrument
A toggle that separates calls and puts (so that separate skews can be applied), or combines calls and puts (so that one skew can be applied to both calls and puts). By default, the menu displays calls and puts combined.
Skew
Enables you to use the default skew or a skew you have created. Choosing the skew name displays the Volatility Skew menu, which contains alternate skews. For more information on the volatility skew menu, please read The Vlty Skew Menu, page 106.
View
Displays the volatility skew in a miniature volatility skew window. For more information on this feature, please read Viewing a Skew.
Vlty
Displays the current base volatility for the skew.

Choosing Done causes the menu to disappear and applies the skew to the chart based on the settings you have changed.