← tanukitrade.com Open WebApp Start 7-day free trial

Learn

Vertical & horizontal skew

Vertical skew describes how implied volatility varies across strikes within the same expiration. TanukiTrade also summarizes call-versus-put premium differences with a price-based skew percentage. Horizontal skew compares implied volatility (IVx) across expiration dates. Keep the IV curve and the price-based reading separate.

DimensionWhat it comparesWhere you see it in TanukiTrade
Vertical skew
(Across strikes, same expiry)		The IV-by-strike curve. TanukiTrade's price-based summary compares OTM call and put premiums at equal distance from spot; it does not classify the full IV curve.GEX Matrix SKEW column and Screener Vertical Skew %; read alongside the two wings of Adaptive EM.
Horizontal skew
(Across expirations, over time)		IVx differences between neighboring expirations or weekly/monthly horizons (backwardation vs. contango).GEX Matrix parenthesized (%) under IVx, Screener Weekly / Monthly IVx Skew.

1. Vertical skew: IV shape and call/put pricing

Plot the implied volatility of options across strikes for one expiration. The curve describes both the difference between the wings and their height relative to the at-the-money (ATM) IV. A comparison of two option premiums cannot reveal that entire shape.

IV curves across strikes: put-side smirk, smile, flat, and call-side skew Four schematic IV-by-strike curves for one expiration. A smile has both wings above ATM IV; a flat curve has similar IV across strikes. Put-side and call-side skew show which wing has higher IV. These shapes are not classifications derived from TanukiTrade's two-point call/put premium comparison. IV curve shapes — one expiration, different strikes Implied volatility ATM (Spot) ← Lower strikes (OTM Puts) Higher strikes (OTM Calls) → Put-side smirk Higher downside IV Smile Both wings above ATM IV Flat Similar IV across strikes Call-side skew Higher upside IV Schematic IV curves; the colors identify the curves, not the sign of a price-skew percentage. A near-zero call/put price-skew reading does not identify a smile.
Illustrative IV-by-strike shapes for one expiration: put-side smirk, smile, flat, and call-side skew. A smile has both wings above ATM IV; a near-zero call/put price-skew reading does not establish that shape.
  • Put-side smirk: the lower-strike, OTM put wing has higher IV than the upper-strike, OTM call wing. Downside skew is common in equity-index options, but its shape and steepness can change.
  • Smile: both OTM wings have higher IV than the ATM region. The two wings need not be equally high; a smile can also be asymmetric.
  • Flat: IV is similar across strikes. Unlike a smile, neither wing is elevated relative to ATM IV.
  • Call-side / reverse skew: the upper-strike, OTM call wing has higher IV than the lower-strike, OTM put wing.

These are schematic IV curves, not current market observations or classifications inferred from TanukiTrade's percentage. See OIC's explanation of flat, smile, and smirk curves for the distinction.

Read TanukiTrade's price-based skew percentage

  • Negative: the sampled put premium is higher than the sampled call premium.
  • Near zero: the two sampled premiums are similar. This does not establish whether the IV curve is flat, smile-shaped, or another shape, and does not imply low overall IV.
  • Positive: the sampled call premium is higher than the sampled put premium.

To identify a smile, compare the wings' IVs with ATM IV for the same expiration, then inspect the intervening strikes. The price-skew reading does not perform that ATM-relative comparison. Read it alongside OTM delta curves and Tanuki Smart EM Range; their wing asymmetry is a related observation, not a reconstruction of the full IV curve.

Compare a symbol's vertical skew against its own baseline before calling a reading extreme. A call-rich reading describes where option premium is concentrated—it does not prove customers are net long calls or predict the direction of the next spot move.

2. Horizontal IVx skew: term structure across expirations

Horizontal skew measures how IVx changes from one expiration date to the next along the calendar:

IVx term structure shapes across expirations: Contango, Flat, and Backwardation Conceptual chart comparing three IVx term structures across expiration dates (0/1, W1, W2, M1, M2): upward-sloping Contango, horizontal Flat, and downward-sloping Backwardation where near-term IVx sits above later expirations. IVx term structure — comparing implied volatility across expirations High IVx Mid IVx Low IVx 0 / 1 W1 W2 M1 M2 Expiration horizon (near-term → further-dated DTE) Contango (↗) IVx rises with DTE Flat (→) Similar IVx across dates Backwardation (↘) Front IVx richer than back Each dot is one expiration’s IVx blend. Catalysts (earnings, CPI, FOMC) often lift near-term IVx into backwardation.
Horizontal IVx skew compares implied volatility across expirations: Contango (rising with DTE), Flat, or Backwardation (front expiry richer than later expiries).
  • In GEX Matrix: horizontal skew appears in parentheses beneath an expiration's IVx value, highlighting sharp step-changes between neighboring dates.
  • In Options Screener: the Weekly IVx Skew and Monthly IVx Skew columns (and presets such as Weekly Timespread) filter for term-structure gaps across near-term and monthly windows.
  • Event concentration: an expiration immediately after an earnings release carries concentrated event volatility, while a later expiration spreads that event across more days. Front-end backwardation around an event reflects concentrated catalyst risk, not automatically a mispricing.

Vertical and horizontal skew describe different dimensions of the same volatility surface; one reading does not determine the other. An index can show put-rich price skew (−35%) on each expiration while its IVx term structure rises in contango—or falls into backwardation ahead of CPI. That percentage describes the premium comparison, not a 35-percentage-point IV gap. For calendar and diagonal spread considerations, see Trade walkthrough lessons.

Where you see it

TanukiTrade documentation. Levels are context, not a recommendation. tanukitrade.com