One of these three skews is wrong
Looking at the skew dashboard right now.
Bond put skew is sitting around the 75th to 85th percentile. Gold put skew is around the 85th percentile. Both are bid. Investors are loading up on downside protection in both asset classes.
Equity put skew? Near the bottom of the range. Cheap as chips.
Three asset classes, three different reads on the same macro picture. One of them is probably mispriced.
I don't know which way it resolves. These setups don't tend to sit like this forever.
For me, I think it resolves by equity skew catching a bid rather than bond and gold skew rolling back down. Stocks ignoring what bonds and gold are pricing usually ends with equity put skew waking up at some point.
The equity skew flattening has been driven by a high demand for calls, and for sure selling calls is too dangerous given how markets are melting up. It's the cheapness of puts that is more of an opportunity and one that has defined risk.
Imran
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