Time:
The Skew Chart also has the ability to show skews based on Time to Expiration, this setting is chosen by selecting Time from the Skew Type dropdown menu. When Time is chosen in the Skew Chart Type the chart will now display a single strike price on the skew chart with a line that connects the volatility from expiration to expiration. The vertical axis still represents the Implied Volatility of the option however the horizontal axis represents how many days until expiration the contract is. For example, the selected IBM 185 Call shown has three expirations being displayed, the first that expires in 4 Days and the second that expires in 8 days and the last that expires in 11 days. Contracts are represented on the Skew Lines by the bolded dots.
When the Skew Chart Type is set to Time the following settings are available to modify:
Points: Allows the trader to select how many options contracts are displayed on the Skew Chart. If 3 is chosen the Skew Chart will show the nearest expiration and two additional contracts with the next expiration dates.
Calls/Puts: Selects which options to show on the Skew Chart. When Calls are selected the Skew Chart will be populated by solid lines connecting the strike prices together. Puts are identified by a dotted line. The user can also select both to show Calls and Puts simultaneously.
Display Data: The Skew Chart by default is designed to show skews of Volatility but can also be used to show skews of an option contracts Delta or Theta by selecting these from this drop down menu.
Strike Selection: Different Strike Prices can be chosen from the drop down menus, press the left mouse button to access the list of available Strike Prices that can be displayed. To display them on the skew chart left click on the button to the right of the Strike Price drop down. Strike Prices that are selected for viewing will have a gold shaded button and that expiration will be identified on the skew chart by the color of the line next to the strike price chosen.
