Crashes don't start from the top
"Buy protection when markets are euphoric and everyone's greedy."
Every beginner trading book says that.
Look at what actually precedes the real meltdowns.
Feb 2020. Oct 2008. Right now. None of them started from all-time highs. They started from conditions already oversold. Already fragile.
The mechanism is positioning. When markets are already stressed, dealers are short gamma. Margin is stretched thin. One more push lower and hedging flows compound the problem.
There's no one left to buy.
Compare that to all-time highs with low vol. Everyone has room to absorb a dip. Cushion everywhere. A bad headline gets shrugged off.
But when you're already down 5% and VIX is sitting at 25, that same headline triggers the cascade.
Fear is priced in for a reason. The question is whether it's priced in enough.
And that's what makes reading skew so hard. Extreme skew can signal peak panic (the kind that marks a bottom). It can also precede a crash. Same reading, opposite outcomes.
Skew is one input. You read it alongside regime, positioning, and term structure. Not in isolation.
These metrics show us where the fault lines are. It's our job to navigate them IF the earthquake hits.
Imran
Disclaimer (Your Gains & Losses, Your Responsibility): This content from Options Insight LLC (“Options Insight”) is for educational purposes only and does not provide individual investment advice or recommendations, nor should it be considered an offer to buy or sell any security. All information is general and not tailored to your specific objectives, financial situation, or risk tolerance. Employees of Options Insight may hold positions in the assets discussed. While we use sources believed to be reliable, we are not responsible for errors, omissions, or losses resulting from reliance on this content. Always consult a licensed investment professional.
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