How Can a Trader Profit from an Observed Volatility Skew?

A trader can profit from an observed volatility skew by implementing a relative value trade, often called a skew trade. This involves simultaneously buying an option that is perceived to be undervalued (low IV for its strike) and selling an option that is perceived to be overvalued (high IV for its strike).

For example, a trader might sell the high-IV OTM put and buy a cheaper option to hedge the position.