Price & Market BehaviorExtended setlive in productionNew

option-implied kurtosis butterfly

Updated dailyData needs: highlong onlyshort onlylong short

2019

Bali, T. G., Hu, J. & Murray, S. (2019). Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock Returns. SSRN 2322945.

Read the paper →

In plain terms

When options imply the stock could make a big jump in either direction (fat tails), it tends to earn higher returns than when the option market expects a tame, narrow range.

How it works

Ex-ante option-implied kurtosis positively predicts the cross-section of stock returns. Implied kurtosis is the convexity of the implied-vol smile: a steep, convex smile (fat risk-neutral tails) precedes higher returns. The 25-delta butterfly = (put_iv_25 + call_iv_25)/2 - atm_iv is the standard smile-convexity proxy.

Live results

0 times picked on its own · 23 times inside a blend (22 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 23 such blended picks (22 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Options surface daily
End-of-day OPRA option chains used by IV-skew family.
Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Captures the 4th-moment (tail-convexity) premium that is distinct from skew, with fat-tail names earning higher returns.

Related families

option-implied variance asymmetryPrice & Market Behavior

When the options market is pricing in more room for the stock to rise than to crash, the stock tends to go up afterward.

risk-neutral skewness shortPrice & Market Behavior

Stocks whose options make them look like lottery tickets with big upside tend to disappoint, so this strategy bets against them.

Explore option-implied kurtosis butterfly on alphactor.ai

See which tickers this family is currently firing on, with live signals and rankings.

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