Reading skew before a central-bank week
How we structure a short skew checklist when a policy decision sits inside an options expiry window.
Central-bank weeks compress decision time. Spot narratives dominate the morning notes; implied volatility often moves on a different clock. When we monitor a book through an ECB or FOMC week that overlaps an expiry, we start with skew rather than the headline index level.
The five-point skew pass
- Front-end wing versus belly — Has the wing cheapened relative to the belly after the last similar meeting, or is the market still paying for crash convexity?
- Term-structure kink — Does the surface show a discrete jump across the meeting date, or a smooth hump that already embeds the event?
- Cross-asset confirmation — For equity-index books, we glance at FX vol in the same currency bloc to see whether the event premium is equity-specific.
- Prior meeting path — We keep a short ledger of how skew behaved in the two sessions before and after the last comparable decision.
- Hedge timing windows — Separate “before the print” and “after the first reaction hour” — desks that blur those windows often pay twice.
What we leave out
We do not forecast the rate decision itself. The briefing exists to describe how implied volatility is already pricing uncertainty, and where that pricing looks inconsistent with the desk’s gamma budget.
How this feeds a retainer
On monitoring engagements, the five-point pass becomes a half-page section in the morning note for the two sessions before the meeting. After the print, we write a short wrap only if the surface moved outside the thresholds agreed at calibration.