Using the DVOL Butterfly Index to Track Options Skew Richness
Summary
The document introduces a metric comparing Deribit’s DVOL Index with constant 30-day at-the-money volatility. It can be displayed as either a ratio or a spread, offering a way to examine how the volatility represented across strikes differs from the at-the-money benchmark. The name refers to the information the comparison may provide about option butterflies.
The chart also shows the 10th and 90th percentile boundaries and the median, which the authors present as reference levels for assessing relative richness and potential mean reversion. The document describes the metric and its intended interpretation, but provides no formula, historical examples, performance evidence, or guidance on how to trade the boundaries. It should therefore be treated as a visualization and relative measure of skew, not as a validated standalone signal.
Key ideas
- The index compares DVOL with constant 30-day at-the-money volatility.
- Users can view the relationship as a ratio or a spread.
- The comparison is intended to reveal relative richness in the volatility skew.
- Percentile boundaries and a median provide historical reference levels for assessing mean reversion.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.