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Convexity

What It Shows

Convexity measures the curvature of the volatility smile — how much vol rises as you move away from at-the-money in either direction. A highly convex smile has expensive wings relative to ATM; a flat smile means the market is not paying much for tail risk.

Skewbot surfaces convexity as a real-time time series, split by dealer and paper flow and separated by call and put side. This lets you track whether demand for convexity is building or collapsing, and who is driving it.

What High Convexity Means

High convexity in options prices means the market is willing to pay a premium for options far from the money. This typically reflects:

  • Elevated uncertainty about the magnitude of a potential move
  • Demand for tail hedges (put convexity) or lottery-style upside (call convexity)
  • A market pricing in a bimodal outcome rather than a normal distribution

Low convexity means the market sees a more contained range of outcomes and is not paying for the tails.

Dealer vs. Paper

As with Tilt, Skewbot separates convexity into dealer and paper components:

  • Dealer convexity reflects how market makers are pricing curvature in their books
  • Paper convexity reflects client demand for wing options

Rising paper convexity without corresponding dealer movement suggests clients are buying wings faster than dealers are willing to supply them at current levels.

Call vs. Put Convexity

Call and put convexity can diverge significantly:

  • Put convexity rising — Demand for downside protection in the tails
  • Call convexity rising — Demand for upside optionality, often around events or squeezes
  • Combined convexity — The total curvature across both sides of the smile

Overlays

The Full Convexity toggle adds a smoothed overlay of the entire smile's curvature, giving a single view of how convex the surface is at any moment.