Call skew, a metric used to measure the difference between the implied volatility of call options and put options, has been a key driver of higher volatility in the QQQ (NASDAQ-100 Index) since the April rally began. However, recent observations by SpotGamma suggest that this trend may be reversing, with call skew starting to fade for the first time since the rally started.

As call skew decreases, it can indicate a decrease in single-stock option demand, which has been a major driver of QQQ volatility. This could create a tactical opportunity for investors to short QQQ volatility, as the reduced demand for options could lead to a decrease in volatility.

It’s important to note that this trend is not necessarily a sign of a reversal in the overall bullish trend in the market. Call skew can fluctuate independently of broader market trends, and it’s possible for call skew to remain high even if the market continues to rally.

However, the easing of call skew could be a sign that investors are becoming more cautious and less willing to pay up for options, which could lead to a decrease in QQQ volatility. This could be particularly relevant for investors who have been using options as a way to hedge against potential market downturns.