What Is Put Skew and How It Affects Iron Condor Strike Selection

Put skew is one of the most consistent structural features of equity index options. If you've noticed that the put side of an iron condor collects more premium per point of width than the call side — that's put skew in action. Understanding it helps you make better decisions about where to set your strikes and how to interpret your premium collection.

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What Is Put Skew?

Put skew (also called volatility skew) is the phenomenon where out-of-the-money (OTM) puts have higher implied volatility (IV) than OTM calls at equivalent distances from the current price.

On a volatility surface chart, instead of seeing a symmetric "smile," you see an asymmetric curve — the left side (downside strikes) slopes steeply upward while the right side (upside strikes) is relatively flat.

Why does this happen?

• Institutional investors and fund managers continuously buy downside protection (put options) to hedge their equity portfolios
• This persistent demand for OTM puts drives up their implied volatility relative to calls
• The effect is structural — it has been present in equity index options for decades, particularly post-1987

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How Put Skew Affects Iron Condor Strike Selection

An iron condor has two short spreads: a put spread below the market and a call spread above. Put skew affects how much premium you collect on each side.

The practical effect:

• The put short strike, even at the same delta as the call short strike, will collect more premium
• This is because the put is priced at higher IV due to skew
• If you set both sides at the same delta (e.g., 10-delta puts and 10-delta calls), the put side generates more credit

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Symmetric vs. Asymmetric Delta: A Comparison

Most systematic options traders use symmetric delta for simplicity and consistency. Some traders use asymmetric delta to normalize premium on both sides.

Pros of symmetric delta:

• Simple rules, easy to implement
• Consistent parameters across all trades
• Easier to backtest and analyze

Cons of symmetric delta:

• The put side will always contribute more premium due to skew
• The overall position has a slight credit imbalance between sides

Pros of asymmetric delta:

• Can normalize the credit collected on each side
• May reduce the implicit directional bias of the position

Cons of asymmetric delta:

• More complex rules to manage systematically
• The "right" asymmetry changes as skew changes — requires dynamic adjustment
• Harder to backtest consistently

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Is Put Skew Constant?

No — put skew varies over time. It typically:

• Increases during market selloffs and high-fear environments (when demand for protective puts surges)
• Decreases during calm, low-volatility bull market periods
• Spikes around major events (FOMC, earnings seasons, geopolitical events)

The CBOE SKEW Index specifically measures the degree of put skew — the premium priced into tail risk. CBOE's methodology for the SKEW Index explains how it's calculated. For context on how the broader volatility regime affects both the absolute premium and the skew, see iron condors in high vs low volatility.

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What Systematic Traders Actually Do

For most systematic iron condor traders, the practical takeaway is:

1. Use symmetric delta — keep it simple and consistent
2. Acknowledge that the put side will contribute more premium — this is structural and expected
3. Don't try to perfectly normalize the credit each cycle — skew changes and the attempt to dynamically adjust adds complexity without a proven edge

Tradematic is an automated iron condor trading platform that uses symmetric delta parameters for entries, providing a consistent and repeatable systematic approach. For understanding how IVR filters interact with skew at entry, see how to use IV percentile for iron condor entry timing.

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Frequently Asked Questions

Does put skew mean iron condors are biased to the put side? In terms of premium collected, yes — the put short strike typically contributes more credit than the call short strike at the same delta. But this doesn't mean the put side is more likely to be breached; skew reflects pricing, not directional probability.

Should I widen my put side to capture more skew premium? You can — but wider put spreads also take on more downside risk. The additional premium from skew doesn't come free. Most systematic traders keep the structure symmetric for simplicity.

What is the SKEW Index? The CBOE SKEW Index measures the implied probability of a tail event (a large downside move) based on the premium of OTM puts. High SKEW values indicate elevated put skew — the market is pricing in a higher tail risk premium.

How does put skew relate to dealer hedging? The persistent demand for downside protection that creates put skew is partly driven by institutional hedging. For more on how dealer flows affect options market structure, see understanding dealer hedging and its impact on options markets.

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Conclusion

Put skew is a permanent, structural feature of equity index options. OTM puts always carry higher implied volatility than OTM calls because of persistent demand for downside protection. For iron condor traders, this means the put side collects more premium per delta — a fact to understand and accept rather than a problem to solve.

Most systematic traders use symmetric delta for consistency. Complex asymmetric approaches add rule complexity without a clear, proven improvement in risk-adjusted returns.

Start your 7-day free trial and explore how Tradematic systematizes iron condor entries using consistent, rules-based parameters.

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Trading involves risk and losses can occur. Past performance does not guarantee future results. Options trading is not suitable for all investors. Only allocate capital you are comfortable risking.