What Is the Difference between a "Volatility Skew" and a "Volatility Smile"? ▴ Learn

What Is the Difference between a “Volatility Skew” and a “Volatility Smile”?

A volatility smile is a plot where implied volatility is lowest for At-the-Money (ATM) options and increases symmetrically for both OTM calls and OTM puts. A volatility skew is a non-symmetrical curve where implied volatility is significantly higher for OTM puts than for OTM calls.

The skew is more common in equity and crypto markets, reflecting a greater demand for downside protection.

What Is a “Volatility Skew” or “Smile” and What Does It Indicate about Market Sentiment?

How Does the Implied Volatility Skew Reflect the Market’s Perception of Tail Risk?

What Is the Concept of “Skew” in Relation to the Time Value of ATM Vs OTM Options?

What Is the Volatility Smile in Crypto Options and How Does Network Maturity Affect It?