It's not clear to me how to realize skewness. In other words, how do you implement skew arbitrage? There seems to be no well-known recipe like in volatility arbitrage.
Volatility arbitrage (or vol arb) is a type of statistical arbitrage implemented by trading a delta neutral portfolio of an option and its underlier. The objective is to take advantage of differences between the implied volatility and a forecast of future realized volatility of the option's underlier.
My hypothetical skew arbitrage definition:
Skew arbitrage is a type of statistical arbitrage implemented by trading a delta and volatility neutral portfolio. The objective is to take advantage of differences between the implied skew and a forecast of future realized skew of the option's underlier.
Is it possible to make such a skew-arb portfolio in practice? If I have great confidence in my skew forecast but not in my volatility forecast, I am tempted to engage in this type arbitrage. But again, this is just a hypothetical version of skew arbitrage. If you know a correct and more practical version, you are welcome to correct me!
The same question but in a different voice: In practice, a skew bet is implemented through vertical spread, i.e. buying and selling options of different strikes. How do options traders hedge / realize the edge of the spread they trade that is indifferent to the underlying volatility?