Options Skew
a.k.a. Volatility skew, Skew
The pattern where options at different strike prices carry different implied volatilities, revealing which way traders fear a big move.
Options skew shows where traders are buying protection. In theory, options at every strike should price in the same implied volatility. In practice they do not. If puts (bets on a fall) are much pricier than equally distant calls, the market is paying up to insure against a drop.
In forex, the skew is often read through "risk reversals", which compare call and put prices. A strong skew toward yen calls, for instance, says traders are nervous about a sudden yen surge, often during risk-off episodes.
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