A marketwide price anomaly persists because selling under-hedged puts is collectively sanctioned

Evidence

Even the skew can in a sense be seen as the upshot of collective action. It could be perfectly rational for an individual trader to sell low-strike-price puts cheaply, at unskewed prices closer to the implied volatility of other options, without taking the difficult and expensive steps needed to provide a hedge that would be adequate in an extreme crisis. He or she could earn healthy profits; there has been no repeat of 1987; and, if there were, the losses of a bankrupt trader are borne by others. Yet if such trading were engaged in too widely it would create a systemic risk: another 1987 could undermine the very foundations of the options market. To trade that way is, even if individually rational, seen as immoral. It is to be a “shit-seller,” and it has been kept in check by the options market, its clearinghouse, and its regulator, the SEC, through mechanisms such as risk-based margining. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 199

Categorization

• QUESTION: Worth chasing: has the post-2008 era actually eliminated the skew or its ‘shit-seller’ moral category, given vol-mageddon and derivatives blowups like Archegos?