Volatility Skew Explained: Why S&P 500 Puts Cost More Than Calls

At the close on October 14, 2026, the S&P 500 stood at 7,718.94. A November 20 SPX put struck 5% below the market cost about $45.25, or $4,525 per contract. A call struck 5% above the market, same expiry, cost $10.50, or $1,050. The two options are the same distance from the index and the same length of time. The put cost more than four times as much. The reason is volatility skew: the market prices downside options at a much higher implied volatility than upside ones. If you buy protection, sell covered calls, or run a collar on a concentrated stock position, skew is already in every price you pay. New to implied volatility? Start with our implied volatility guide.

What is volatility skew?

Volatility skew is the pattern of implied volatility across strike prices for options on the same underlying with the same expiration. The Black–Scholes model assumes one volatility for every strike. Real markets do not agree, and the shape of the disagreement is the skew.

Chart 1 is the real curve. At the money, November SPX options traded at about 13.8% implied volatility. A put 10% below the index traded at 24.1%, and one 20% below at 36.1%. Calls went the other way: about 11.0% at 5% above the market, rising only slightly to 12.1% at 10% above. That lopsided shape, steep on the put side and nearly flat on the call side, is called a skew or smirk.

Traders summarize it with a few numbers taken at fixed deltas:

What is the difference between skew and a volatility smile?

A smile is symmetric: implied volatility is higher for both far out-of-the-money puts and far out-of-the-money calls, forming a U. A skew is lopsided, with one side much higher than the other.

• Equity indexes (SPX, SPY, QQQ) show a strong downward skew. The far call wing turns up a little, which is why the curve is sometimes called a smirk.
• Single stocks show a smaller put skew and, for speculative growth names or around earnings, sometimes a call skew, when traders bid up upside calls.
• Currencies and some commodities trade closer to a true smile, because a big move in either direction is a risk.

Our vega guide covers how option prices respond to changes in implied volatility; skew tells you that the change is rarely the same at every strike.

Why do S&P 500 puts trade at higher implied volatility?

For two reinforcing reasons: markets fall faster than they rise, and the world is structurally long stocks and short protection.

• Crash asymmetry. Large one-day moves in the S&P 500 are disproportionately down moves, and volatility tends to rise when prices fall. A model with one volatility understates the chance of a sharp decline. Our article on fat tails and black swan events covers the return data.
• Demand for protection. Pension funds, asset managers, insurers and individual investors with concentrated positions buy index puts to protect portfolios. Fewer natural sellers exist for that risk.
• Dealer compensation. Market makers who sell those puts are left short crash risk that delta hedging cannot fully remove, because a gap moves faster than any rebalance. They charge for it with higher implied volatility.
• Call overwriting. Investors sell covered calls on index and stock holdings for income, which adds supply on the call side and pushes call implied volatility down.

Equity index skew became a permanent feature of the market after the October 1987 crash; before it, index options traded much closer to a flat volatility curve. It has persisted through every cycle since.

How much does skew change what you pay?

A lot more than most investors assume. To isolate the effect, compare the market price of each option with the price it would have if every strike traded at the 13.8% at-the-money volatility.

Chart 2 is the cost of skew in plain numbers. The 5% out-of-the-money put costs $45.25 in the market versus about $19 at a flat volatility, about 2.4 times as much. The 10% put costs $20.15 versus less than $1. The 5% call costs $10.50 versus about $24.50, less than half. With the SPX multiplier of $100, that put is $4,525 a contract, of which roughly $2,600 is the skew premium.

What does the Cboe SKEW Index tell you?

The Cboe SKEW Index estimates the skewness of S&P 500 returns over the next 30 days from the prices of out-of-the-money SPX options. A reading of 100 means option prices imply a normal distribution with no extra left tail. Higher readings mean the market prices a fatter left tail. Cboe says the index typically ranges from 100 to 150.

At 157.30, SKEW was higher than on 97.6% of the past year’s closes, while the VIX sat at a calm 16.87. That combination, low overall volatility and expensive tail protection, is common: investors keep buying crash insurance even when day-to-day volatility is subdued.

Cboe’s white paper translates SKEW into an estimated risk-neutral probability of a 30-day S&P 500 return two standard deviations below the mean: about 2.3% at a SKEW of 100, rising to 14.45% at 145. Those are prices, not forecasts. They tell you what the market charges for protection, not what will happen.

How does skew change the best way to hedge?

Skew decides which part of a hedge is expensive. The practical rule: when skew is steep, sell the rich wing to fund the part you need.

Two examples from the same November chain, per SPX contract:

• Outright 5% put (7,335 strike): about $4,525. Protection from 5% down to zero, priced at 18.7% implied volatility.
• Put spread (buy 7,335, sell 6,950): about $2,510, or 55% of the outright put. You give up protection below about 10% down, but the put you sell is priced at 24.1% implied volatility, so it refunds far more than a flat-volatility model would say. For many investors, a 5%-to-10% band covers the most likely drawdowns; deeper tail protection can come from dedicated tail hedges.

The same logic explains why steep skew rewards put sellers. Investors running cash-secured puts on stocks they want to own are selling exactly the options that the market overprices. They are also selling crash risk, so size those positions for the drawdown, not the premium.

How does skew affect a collar on concentrated stock?

A collar buys a put and sells a call, so steep skew hits it twice: the put you buy is expensive and the call you sell is cheap. That pushes the call strike, your upside cap, closer to the current price.

1. Floor: buy the 7,335 put, 5% below the index, for $45.25.
2. Cap with real skew: to roughly fund it you must sell the 7,910 call, only 2.5% above the index, which brings in $48.30.
3. Cap with no skew: at a flat 13.8% volatility, the same put would cost about $19, funded by a call near 8,150, about 5.6% above the index.
4. Result: skew roughly halves the upside you keep in a zero-cost collar over 37 days.

Single-stock collars on mega-cap tech are usually less extreme than index collars, because single-stock skew is flatter and some names carry call skew. Before you lock in a collar on a concentrated position, compare the implied volatility of your put and call strikes. If the call is far cheaper, consider a lower put strike, a longer expiration, or a put spread collar, rather than accepting a tight cap. Our protective put guide covers the outright alternative.

How do you read skew before you trade?

1. Compare 25-delta put and call IV on your broker’s chain for the expiry you plan to trade. A gap of several points, like the 5.2 points on November SPX, is steep.
2. Check the SKEW Index for the overall cost of index tail protection; readings in the upper part of its range mean outright puts are expensive.
3. Look at the VIX alongside it. Low VIX with high SKEW means the at-the-money options are cheap but the wings are rich.
4. Choose the structure using Chart 3: spreads and put sales when skew is steep, outright puts when it is flat.
5. Price the collar both ways, at your preferred floor and at one strike lower, and see how much cap each one buys.
6. Recheck after events. Skew can flatten after a selloff and steepen in a calm rally; the best hedge on Monday may not be the best on Friday. Second-order flows tied to skew are covered in vanna and charm.

Frequently asked questions

Key takeaways

1. Volatility skew is implied volatility varying by strike; in index options, puts carry more of it than calls.
2. On October 14, 2026 the November SPX 25-delta put traded at 17.0% IV versus 11.9% for the 25-delta call; the 10-delta put at 22.2% versus 11.1%.
3. Skew more than doubled the cost of a 5% out-of-the-money SPX put ($45.25 versus about $19 at a flat volatility) and halved the 5% call.
4. The Cboe SKEW Index closed at 157.30 on October 14, 2026, near the top of its one-year range of 126.41–161.86; it measures the cost of tail protection, not the odds of a crash.
5. Steep skew favors selling the rich wing: put spreads over outright puts, and cash-secured puts for income.
6. Steep skew hurts collars: cheap calls mean a low cap; widen the put or extend the expiry before accepting it.

Sources and method

1. Cboe, SKEW Index dashboard — definition, the typical 100–150 range and daily price history
2. Cboe, The Cboe SKEW Index white paper — methodology and the table translating SKEW into tail probabilities
3. Cboe, S&P 500 Index options — SPX contract, $100 multiplier and expirations
4. Cboe, SPX options specifications — AM-settled standard monthly expirations on the third Friday
5. Cboe, VIX Index dashboard — VIX closed at 16.87 on October 14, 2026
6. FINRA, Options investor guide — risks of buying and selling options

SPX option quotes, implied volatilities and deltas are Cboe delayed quotes at the October 14, 2026 close (SPX 7,718.94) for standard monthly options expiring November 20, 2026; prices are the mid of bid and ask. SKEW and VIX values are from Cboe’s published daily histories, with one-year statistics calculated by Proflex. Flat-volatility prices are Proflex calculations with the Black-76 model on the implied forward, at the 13.8% at-the-money implied volatility and a 4.26% rate. Quotes move constantly; examples are for illustration, not recommendations.