Options skew in digital asset markets refers to the implied volatility difference between out-of-the-money call options and out-of-the-money put options with the same expiration date. A pronounced skew indicates market participants anticipate larger price movements in one direction. It reflects a divergence from the assumption of a log-normal distribution for asset prices. This metric is a key indicator of market sentiment and potential price direction.
Context
Options skew is a significant analytical tool in crypto market news, providing insights into institutional sentiment and hedging strategies. Reports often reference options skew to gauge whether professional traders expect a sharp price increase or decrease for major cryptocurrencies. A noticeable skew can signal impending volatility or a shift in market risk perception, offering a forward-looking view on potential price action.
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