Consider an equity option such as SPY and I'm long the skew, do I make money if puts raise in price and calls decrease or the opposite?

  • 3
    $\begingroup$ Being long something means that you expect to make money if that something increases. If the skew is negative (downward sloping) being long skew is roughly speaking being long an OTM put and short an OTM call. $\endgroup$ Aug 31 at 19:24
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    $\begingroup$ The skew is the vol of a more OTM options less that of a less OTM one. One classic such measure for equities is that of a 10% OTM put versus an ATM put. Being long skew means you want this spread to increase. Roughly speaking, you'd be long the 10% OTM options, funded by selling the ATM ones (in some structure that didn't leave you with a huge directional bias or overall vol bias). $\endgroup$
    – demully
    Aug 31 at 21:41
  • $\begingroup$ OTM vol minus ATM vol makes sense. Out of curiosity, does a 10% OTM put mean a 90%-moneyness put or a 10-delta put? $\endgroup$
    – Alex
    Aug 31 at 21:47

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