Volatility Skew Explained (Put Skew & Call Skew)

Volatility skew is the asymmetry in implied volatility between puts and calls. It reveals where option demand — and fear or greed — concentrates, often shifting before price turns. Here is how to read it.

Senzoukria · Learn · Updated June 2026

Two options can be the same distance from the money and still cost very differently. That gap is the volatility skew — the asymmetry in implied volatility (IV) between puts and calls. It is a direct read on where the market is paying up for protection or for upside, and it pairs naturally with gamma exposure.

The three shapes of skew

Put skew (fear skew)

OTM puts carry higher IV than OTM calls. Traders are paying a premium to hedge downside — a bearish protection bias. The market fears a drop more than it hopes for a rally. This is the "normal" state for equity indices.

Call skew (greed skew)

OTM calls carry higher IV than OTM puts. Demand is for upside — speculation or upside protection — a bullish bias. Less common; it often shows up in aggressive bull runs or short squeezes.

Flat skew

Symmetric IV — no strong directional bias. A balanced market waiting for a catalyst.

How skew is measured: the 25-delta risk reversal

The standard gauge is the 25-delta risk reversal (RR):

RR = IV(25δ call) − IV(25δ put)

  • RR negative → put skew dominant → bearish protection bias.
  • RR positive → call skew dominant → bullish bias.
  • Roughly −2% to +2% → neutral; beyond ±5% → a strong skew.

Skew also has a term structure: short-dated skew reflects the immediate mood, while 30–90 day skew reflects positioning and the macro backdrop.

Skew vs price — the early-warning signal

Skew often shifts before price does:

  • Skew divergence: price makes new highs but skew turns more bearish (RR falling) → protection demand is rising into strength — a warning.
  • Skew confirmation: price and skew move together → the trend has options positioning behind it.
  • Extreme put skew at support + heavy hedging can mark capitulation — watch for absorption on the tape to confirm a turn.

Putting it together

  • High put skew + strong price → institutions hedging into strength (possible distribution).
  • Call skew + weak price → contrarian bullish positioning → potential squeeze.
  • Flat skew at a key level → no conviction → wait for confirmation.

Key takeaway: skew shows where fear and greed are priced in the options market, and it frequently turns before price. Read it alongside GEX and the footprint, not alone.

See skew with your order flow

Senzoukria brings options context — skew, GEX, gamma walls — next to your footprint, so the positioning picture and the tape live on one screen. Free preview, no card — start here.

Frequently asked questions

What is volatility skew?
Volatility skew is the difference in implied volatility (IV) between puts and calls across strikes. When OTM puts carry higher IV than OTM calls, you have put skew (fear); when OTM calls carry higher IV, you have call skew (greed).
What is the 25-delta risk reversal?
The 25-delta risk reversal (RR) measures skew as IV(25-delta call) minus IV(25-delta put). A negative RR means put skew dominates (bearish protection bias); a positive RR means call skew dominates (bullish bias). Roughly -2% to +2% is neutral.
Why does skew matter for traders?
Skew shows where option demand and hedging concentrate, and it often flips before price does. A skew that turns bearish while price still rises ("skew divergence") is an early warning; skew aligned with price confirms the trend.