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Volatility skew describes how implied volatility changes across strike prices. In equities, downside puts often trade at higher implied volatility than upside calls, creating the familiar equity skew.
Skew reflects supply and demand for protection, event risk, and structural hedging pressure. It can influence whether a strategy is relatively cheap or expensive even when headline implied volatility looks similar.
That is why volatility skew analysis matters for spreads, hedges, and directional trades alike.
Traders compare skew across expirations, across symbols, and against recent history. A steeper downside skew can imply greater demand for crash protection or greater uncertainty around a near-term event.
Reading skew well is often easier when it is placed next to an implied volatility surface and dealer positioning data.
ColorVol is designed as a free options analyzer that helps you inspect volatility skew, IV term structure, and gamma-related context without switching tools.
Not exactly. A smile is more symmetric, while skew usually refers to a directional imbalance such as richer downside puts.
Equity traders often bid for put protection, which can push implied volatility higher on lower strikes.
