The Skinny on Options: Abstract Applications - December 30, 2024 - How to Trade Market Skew

This episode explores the concept of market skew and its implications for portfolio strategies. Against the backdrop of a light-hearted discussion about personal preferences (comedians, restaurants), the hosts delve into the complexities of market skew, differentiating between positive and negative skewness and their respective characteristics. More significantly, they introduce a portfolio strategy that involves shorting indexes (to capitalize on negative skew) and simultaneously holding long positions in individual stocks (to benefit from positive skew). For instance, they cite Tesla, Nvidia, and Bitcoin as examples of assets exhibiting positive skew. However, a debate ensues regarding the practicality of this strategy for the average retail trader, with differing opinions on whether most traders naturally adopt this approach or if it's a more theoretical concept. The discussion concludes by highlighting the importance of considering market skew when constructing a portfolio and promoting a show dedicated to bridging the gap between theory and practical application of this strategy.