Here's a habit worth breaking this week.

You see puts trading richer than calls — same distance from spot, same expiration — and your brain fills in the blank: the market must think down is more likely than up. Crash coming.

That read is backwards.

Go test it. If skew forecast crashes, steep skew should be followed by drops. Instead, skew is tilted toward puts almost always — through bull markets, flat markets, years of the index grinding higher. A signal that's always on isn't predicting anything.

So what is it? A put is insurance, and insurance is never priced at fair odds. Portfolios are structurally long — everyone wants downside protection, almost nobody needs upside. One-sided demand means puts trade rich. On top of that, markets fall faster than they rise, so the option that pays in a violent move is genuinely worth more. Two structural reasons. Neither is a crystal ball.

The line to keep: skew is a price tag on fear, not a forecast of it.

Here's where it costs money. Skew steepens most exactly when informed hedgers are paying up for protection — right before the weather turns. The trader who "knows puts are overpriced" sells that richness for free money. He's selling umbrellas into the first drops of rain. Then the index drops three percent, vol explodes alongside it, and months of collected premium vanish in an afternoon. He sold insurance right before the claim came in.

What a disciplined trader does: stop reading skew as direction. If you sell put premium, size it as if the tail event will happen — because eventually it does, and the payout is the whole game. And when skew steepens, resist the instinct to fade it. That's often the smart money hedging before you see why.

The question is never "is this expensive." It's "am I being paid enough to take the risk the price is describing." Expensive and overpriced are not the same word.

This is educational commentary, not personalized financial advice — trade your own plan.

Full breakdown here: https://youtu.be/ygZhsyObVMk

— Paragon Signals