Volatility Skew
Volatility Skew is the pattern of implied volatility varying across strikes — typically higher IV on out-of-the-money puts than calls.
What Volatility Skew Means
Volatility Skew describes how implied volatility differs across strikes for the same expiry. In index options, out-of-the-money puts almost always carry higher IV than equidistant out-of-the-money calls. Plotted across strikes, IV forms a downward slope from puts to calls — the skew.
The reason is demand for protection. Investors holding long portfolios buy downside puts as insurance, bidding up put IV. Sharp market falls are also faster and more violent than rallies, so the market prices more volatility into the downside.
How to Read Skew
Steepening skew (puts getting relatively more expensive) signals rising fear and demand for crash protection. Flattening skew suggests complacency. Comparing skew over time tells you whether the market is paying up for downside or has grown comfortable. The shape also guides strategy choice — steep skew makes put credit spreads and jade lizards more attractive.
Skew in the Indian Market
Nifty and BankNifty consistently show a pronounced put skew that steepens before major events and during selloffs. Reading skew helps decide which side to sell — selling rich downside IV can be more rewarding than selling cheap upside. Quintal Mind plots live IV across the full strike chain so the skew curve is visible at a glance.
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