Stats › Volatility and VIX › Volatility skew
Volatility skew did not exist before 19 October 1987
| Before 19 Oct 1987 | After | |
|---|---|---|
| Skew in index options | almost none, 1983 to 1987 | present every day since |
| Largest single day decline | just over 12% | 20.47% on the day itself |
| Average worst day of a year | -2.72%, 1950 to 1986 | -4.57%, 1987 to 2020 |
Source: Cboe Insights, the dawn of a new era. Skew appeared in index option prices in October 1987 and never left.
Index put options cost more than equivalent calls, because the market prices large falls as more likely than a bell curve allows. For the first four years of index option trading there was almost no observable skew. Black Monday in 1987 put it there.
20.47%S&P 500 on 19 Oct 1987
just over 12%Worst day before that
100 to 150SKEW historical range
115SKEW average
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