An option has convexity because the relationship between the price of the underlying asset and the value of the option is not linear.

We actively monitor several investor sentiment gauges that indicate how optimistic or pessimistic investors are about the stock market. One of the sentiment indicators we monitor is the Citigroup Panic/Euphoria Model. When it reaches an extreme, I comment on it here.

The Cboe Implied VIX Index is a measure of expected future "implied" volatility. The Cboe® Realized Volatility Index is designed to indicate the magnitude of actual realized daily price movements by measuring the annualized standard deviation in the daily price return of an underlying over a specific period.

A position with asymmetric risk/reward is one in which the possible profit is larger than the potential loss, or the size of the expected gain is greater than the magnitude of the loss.

I pointed out in Downtrend but Statistically Oversold Short-Term as Gold Turns Up the US Dollar had reached a statistically oversold level, setting up a high probability for a countrend.

According to Citi, the panic/euphoria model is a gauge of investor sentiment. It identifies "Panic" and "Euphoria" levels which are statistically driven buy and sell signals for the broader market.