What is the 'Volatility Skew'
The volatility skew is the difference in implied volatility (IV) between outofthemoney, atthemoney and inthemoney options. Volatility skew, which is affected by sentiment and the supply/demand relationship, provides information on whether fund managers prefer to write calls or puts.
Also known as "vertical skew".
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BREAKING DOWN 'Volatility Skew'
A situation where atthemoney options have lower IVs than outofthemoney options is sometimes referred to as a volatility "smile", due to the shape it creates on a chart (as above). In markets such as the equity markets, a skew occurs because money managers usually prefer to write calls over puts.
RELATED TERMS

Horizontal Skew
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Volatility Smile
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Implied Volatility  IV
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