In options trading, skew refers to the relationship between the implied volatility of a option and the underlying asset’s price. A positive skew indicates that higher-strike options are more expensive than lower-strike options, while a negative skew means the opposite. However, when upside skew implodes and downside skew explodes, it can create an interesting dynamic in the market.

Upside skew refers to the tendency of option prices to increase as the underlying asset’s price rises. When this happens, the cost of buying a call option increases more slowly than the cost of buying a put option, leading to a negative skew. On the other hand, downside skew refers to the tendency of option prices to decrease faster than the underlying asset’s price falls. This creates an opportunity for traders to profit from potential price drops in the underlying asset.

The recent implosion of upside skew and explosion of downside skew could be a sign of a possible move higher in the market. When upside skew collapses, it can lead to a situation where call options become cheaper relative to put options, which can increase the demand for calls and create a more bullish environment. Conversely, when downside skew spikes, it can indicate that investors are becoming increasingly risk-averse and may be more likely to sell their positions in the market, leading to potential price drops.

It is important to note, however, that skew is just one of many factors that traders should consider when making investment decisions. Other factors such as economic indicators, geopolitical events, and company performance can also impact the market and should be taken into account when analyzing potential trades.