What Is Volatility Skew? The Smile, Measured

Volatility skew is the pattern in an option chain where different strikes on the same stock, with the same expiration, trade at different implied volatilities. In textbooks every strike would carry one volatility. On the real tape, downside strikes almost always cost more — a tilt the market has carried since the 1987 crash, and one you can measure directly.

The skew on SPY, strike by strike

Here is the actual curve: out-of-the-money options on SPY, one expiration window, implied volatility by strike level, from real closing prices:

SELECT concat(toString(round(100 * b)), '% of spot') AS strike_vs_spot,
       round(100 * median(implied_volatility), 1) AS otm_iv_pct
FROM (
    SELECT implied_volatility, round(strike_price / underlying_close / 0.05) * 0.05 AS b, option_type
    FROM global_markets.options_greeks
    WHERE underlying_symbol = 'SPY' AND date = toDate('2026-07-15')
      AND iv_converged AND implied_volatility BETWEEN 0.02 AND 5
      AND strike_price / underlying_close BETWEEN 0.83 AND 1.12
      AND expiration_date BETWEEN date + 20 AND date + 45
)
WHERE (b < 1 AND option_type = 'P') OR (b > 1 AND option_type = 'C') OR b = 1
GROUP BY b
HAVING count() >= 10
ORDER BY b

Reading it left to right: a put struck 15% below the market trades at 27.5% implied volatility, the at-the-money level is 13.4%, and a call struck 5% above the market is cheapest at 10.5%. The same underlying, the same expiration — the only thing changing is the strike, and the market charges more than twice the volatility for the deep downside. Crash insurance costs more than lottery tickets; the chart is that sentence, drawn.

Is the smirk universal? The whole market, measured

SELECT count() AS underlyings,
       countIf(put_iv > call_iv) AS puts_richer,
       round(100.0 * countIf(put_iv > call_iv) / count(), 1) AS pct_puts_richer,
       round(100 * quantileExact(0.5)(put_iv - call_iv), 1) AS median_skew_points
FROM (
    SELECT underlying_symbol,
           medianIf(implied_volatility, option_type = 'P' AND strike_price / underlying_close BETWEEN 0.85 AND 0.95) AS put_iv,
           medianIf(implied_volatility, option_type = 'C' AND strike_price / underlying_close BETWEEN 1.05 AND 1.15) AS call_iv
    FROM global_markets.options_greeks
    WHERE date = toDate('2026-07-15') AND iv_converged AND implied_volatility BETWEEN 0.02 AND 5
      AND expiration_date BETWEEN date + 20 AND date + 60
    GROUP BY underlying_symbol
    HAVING countIf(option_type = 'P' AND strike_price / underlying_close BETWEEN 0.85 AND 0.95) >= 5
       AND countIf(option_type = 'C' AND strike_price / underlying_close BETWEEN 1.05 AND 1.15) >= 5
       AND sum(volume) >= 500
)
WHERE put_iv > 0 AND call_iv > 0

Across 348 underlyings with active chains on both sides, 70.4% price their downside puts above their upside calls, with a median gap of 2.2 volatility points. The put smirk is the market's default posture — and the exceptions are where the information is.

The inverted tail: names where the upside costs more

SELECT underlying_symbol AS ticker,
       round(100 * call_iv, 1) AS otm_call_iv_pct,
       round(100 * put_iv, 1) AS otm_put_iv_pct,
       round(100 * (call_iv - put_iv), 1) AS call_over_put_points
FROM (
    SELECT underlying_symbol,
           medianIf(implied_volatility, option_type = 'P' AND strike_price / underlying_close BETWEEN 0.85 AND 0.95) AS put_iv,
           medianIf(implied_volatility, option_type = 'C' AND strike_price / underlying_close BETWEEN 1.05 AND 1.15) AS call_iv
    FROM global_markets.options_greeks
    WHERE date = toDate('2026-07-15') AND iv_converged AND implied_volatility BETWEEN 0.02 AND 5
      AND expiration_date BETWEEN date + 20 AND date + 60
      AND underlying_symbol NOT IN ('KORU','SOXL','SOXS','TQQQ','SQQQ','NVDL','NVDS','NVD','TSLL','TSLQ','TSLZ','SPXL','SPXS','UPRO','SPXU','LABU','LABD','FAS','FAZ','TNA','TZA','YINN','YANG','UDOW','SDOW','BOIL','KOLD','UCO','SCO','USD','SSO','SDS','QLD','QID','ERX','ERY','DRN','DRV','CURE','SOXY','MUU','SNXX','UVXY','SVXY','UVIX','SVIX','BULZ','WEBL','WEBS','DPST','DRIP','GUSH','AGQ','ZSL','BITX','ETHU','MSTX','MSTU','CONL','DUST','JNUG','JDST','NUGT','AMDL','NUAI','VXX','VIXY')
    GROUP BY underlying_symbol
    HAVING countIf(option_type = 'P' AND strike_price / underlying_close BETWEEN 0.85 AND 0.95) >= 5
       AND countIf(option_type = 'C' AND strike_price / underlying_close BETWEEN 1.05 AND 1.15) >= 5
       AND sum(volume) >= 2000
)
WHERE put_iv > 0 AND call_iv > 0 AND call_iv > put_iv
ORDER BY call_over_put_points DESC
LIMIT 8

Roughly three names in ten run the other way, and the steepest cases are dramatic: ASTS prices its out-of-the-money calls at 169.2% against 69.9% for its puts — 99.3 points of extra volatility on the upside. An inverted skew is the option market pricing the big move UP as the tail risk: squeeze candidates, binary-catalyst names, and stocks where the feared scenario is being left behind, not a crash. Leveraged funds and volatility ETPs are excluded from this board — their skew is structural, not informational.

What the skew means for a trade

The skew is a relative price, and it moves the economics of every multi-leg structure. A protective put buyer pays the smirk directly — downside strikes are the expensive end. A collar harvests it: the put you buy is rich, but the call you sell against it is also priced off the same curve, and on inverted-skew names that call sale funds far more of the hedge. The implied volatility number quoted for a stock is really a whole curve of numbers, and which point of the curve your strike sits on is part of the price you pay.

FAQ

What is volatility skew in simple terms?

Different strikes on the same stock and expiration trade at different implied volatilities. In most names, strikes below the market price carry higher IV than strikes above it — downside protection costs more per unit of volatility than upside exposure.

Why do puts usually have higher implied volatility than calls?

Demand and history: portfolio hedgers persistently buy downside puts, sellers demand compensation for crash risk, and markets fall faster than they rise. The pattern has held since October 1987 repriced what a one-day crash could look like.

What does an inverted skew mean?

Calls pricing above puts — the market treating the large UP move as the tail scenario. On this page's measurement date, roughly three in ten active underlyings ran inverted, clustering in squeeze candidates and binary-catalyst names.

Is volatility skew the same as the volatility smile?

Same family. "Smile" describes both wings rising above the at-the-money level; "skew" or "smirk" describes the asymmetric version where one wing — almost always the put side — is higher. Equity indexes typically show a smirk, as SPY's curve above does.

Every number above is a stored, versioned query over the full options tape — expand any panel to audit it, or measure the skew on any underlying from the Strasmore terminal. For where volatility itself is highest right now, see the high-IV board; for what happens to these prices after an event, see IV crush.