Skew

Skew refers to the difference in implied volatility between options with different strike prices. Specifically, it describes the tilt in the volatility smile, where puts and calls are priced differently due to market demand.

In many markets, there is a "put skew," where out-of-the-money puts trade at higher implied volatilities than out-of-the-money calls. This indicates that market participants are more concerned about a market crash than a massive rally.

Skew is a critical indicator of market sentiment and directional bias. In crypto, skew can change rapidly based on news events or changes in leverage usage.

Traders analyze skew to understand where the market is positioned and to identify potential hedging opportunities. It is a vital component of advanced volatility trading strategies.