introduction
Low-latency volatility surface decomposition and normalization.
skewbot is a low-latency options analytics platform dedicated to measuring the volatility surface. Measurement is guided by two key principles: dimensionality reduction and normalization.
why
Our experience is that price seeks liquidity. If we can model where that liquidity is, understand when it is given and taken away, we can better understand the gravity that pulls price.
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 volatility surface into focused views:
| View | What it answers |
|---|---|
| curve | The volatility surface sliced by expiry (implied volatility vs. strike). |
| term | The volatility surface sliced by time (ATM implied volatility vs. expiry). |
| fixed delta vols | Implied volatility at fixed delta coordinates tracked through time. |
| tilt | The steepness of the volatility curve. Callside, putside, quote-based, and transaction-based. |
| flex | The curvature of the smile. Callside, putside, quote-based, and transaction-based. |
| shear | Smile roughness and acute pricing dislocations from ideal prices. |
| liquidity | Real-time order book quality and spread pricing across strikes. |
supported instruments
skewbot provides real-time streams for major index, exchange-traded fund (ETF), and equity options:
- Indices: NDX, RUT, SPX
- ETFs and Commodities: GLD, IWM, QQQ, SLV, SPY, USO
- Single Equities: AAPL, AMD, AMZN, AVGO, GOOGL, INTC, META, MSFT, MU, NFLX, NVDA, PLTR, SPCX, TSLA
trading hours
skewbot operates during regular market trading hours (9:30 AM to 4:00 PM Eastern Time). Real-time streams initialize at market open and close cleanly at market close.