1987 & Skew debate

So you are around 60 by now? You should definitely chime in the thread with the kid looking for advise what to do after college graduation and share your wisdom how being in the market is NOT a good idea for his life. I think he could benefit from your wisdom.

Robert Morse said:
The_Krakenite-I was a Member of The AMEX at the time. I started on the floor in late'82 as a wire clerk and then floor broker for Institutional off floor option traders. In early 1985 I started my own BD and became a independent Option Market Maker. I remember in most cases even before 1987, that OTM puts were higher than OTM calls, but maybe not to the degree as today. I remember it was common for customer flow to buy both calls and puts but some customers would do buy writes. Naked put selling was not common. I found that I was always selling the OTM call worth $1, then buying it back when ITM. When I bought it back, the ITM calls was always very cheap after being high at $1. Put call parity was different for each party because of margin and interest rates. Because the puts always had a bid, it was easy to buy ITM calls, short stock and sell puts and lock in free money. I'm not sure in this helps but ITM puts skews were also higher back then.
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Correct-60 Years old. I started in the business while at NYU in'81. Starting trading at 24.

DiceAreCast said:
So you are around 60 by now? You should definitely chime in the thread with the kid looking for advise what to do after college graduation and share your wisdom how being in the market is NOT a good idea for his life. I think he could benefit from your wisdom.
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I've seen this lack of skew mentioned before. A little googling reminded where I saw it last: see p 227 of the 2004 edition of My Life as a Quant by Derman.

skew.png
 
And today thanks to the Robinhood type traders, we see a skew in the right tail. Below is a graph of 5 delta IV divided by 75 delta 30 day IV for the components of the S&P, we denote SPY_C in our wheel.orats.com online platform:

608d1eaa78dc96fbd9cf7ed7fcd6ed6f.png

https://gyazo.com/608d1eaa78dc96fbd9cf7ed7fcd6ed6f
 
old-historical-cd-rates-1984-2019.jpg


In "87" I could do a covered call on a boring stock. I would then take that money and put into a money market account earning maybe 5-8%. I wasn't too worried about that crash if I recall. If rates rise again, that "might" be a way to generate extra income...
 
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