What Is the Impact of “Volatility Skew” on the Pricing of OTM Puts?

Volatility skew, often a "smile" or "smirk" shape, means that OTM and ITM options are priced with higher implied volatility than ATM options. For puts, this typically means OTM puts have a higher IV (and thus higher premium) than models would suggest, reflecting a higher demand for downside protection.

This makes the purchased put in a collar more expensive.