About Volatility Skew

If you plot implied volatility (IV) against strike for any given expiration, the curve is rarely flat. It usually slopes — sometimes steeply — and the shape of that slope is volatility skew.

Skew matters because it tells you what option market participants are worried about:

• Negative skew (puts more expensive than calls of the same delta) is the equity-index norm. The market pays up for downside protection.
• Positive skew (calls more expensive than puts) shows up before takeover speculation, biotech catalysts, or in commodities like oil during supply shocks.
• Flat skew is rare and usually short-lived; it tends to precede surprise moves in either direction.

Combine skew with put/call ratio and unusual option volume for a fuller picture of where positioning is concentrated.