overview
low-latency volatility surface decomposition
skewbot is a low-latency options analytics platform dedicated to meauring the volatility surface. Measurement is guided by two key principles: dimensionality reduction and normalization.
what skewbot shows
Options markets carry information that the underlying price alone does not. This is because options markets price the distribution of possible outcomes. While it is technically possible to generate a probability density function from the implied volatility surface, trading is a pragmatic endeavor, not an exercise in complexity.
Dimensionality reduction is essential because the surface is too information-rich for a human to process. Normalization is essential because, in the world of prices, relative magnitudes matter more than absolute magnitudes. We need to be able to compare across times, across tickers, and across expiries to establish the relevance of magnitude.
We have found that systematically measuring the shape of the volatility surface is fast, legible, and hence, effective.
In addition to providing the surface via curve and term charts, skewbot decomposes the surface into six focused views:
| View | What it answers |
|---|---|
| Curve | The volatility surface sliced by expiry (implied volatility vs. strike). |
| Term Structure | The volatility surface sliced by delta (implied volatility vs. expiry). |
| Fixed Delta Vols | Implied volatility of fixed delta level and how it has changed over the course of the day. |
| Tilt | The steepness of skew. Callside, putside, quote-based, and transaction-based. Multi-expiry. |
| Convexity | The curvature of the skew. Callside, putside, quote-based, and transaction based. Multi-expiry. |
| Depth | Liquidity of the surface. Callside, putside. In the money and out of the money. Multi-expiry. |
supported instruments
skewbot covers the following major U.S. equity index options and their ETF equivalents:
- NDX — Nasdaq-100 Index
- SPX — S&P 500 Index
- SPY — SPDR S&P 500 ETF
- QQQ — Invesco QQQ ETF
trading hours
skewbot runs during regular trading hours. Data begins streaming at market open and the platform closes cleanly at market close. Pre-market and after-hours data are not displayed.