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ETF option skew

Jason Goepfert
2020-12-03

We saw on Monday how options traders have been jumping into calls again. They've been paying up for the privilege, too. Among major ETFs, the two where traders are paying the most for calls relative to puts are XLI and XLE (industrials and energy). The 3-month 10% OTM skew for both is knocking on the lowest levels in the past 3 years.

The charts below are kind of messy, but we can see the skew (in white) versus the prices of the ETFs (in green). The lower the skew, the more traders are focused on paying up for calls versus puts. It hasn't been too much of a contrary indicator for XLI.

It's been more of a worry for XLE. The fund is at a point that has stopped many previous rallies and it needs to shake that off to have more confidence in the idea that the long-term trend has changed for the better in energy names.

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