Wednesday 10 Jun 2026. The Nifty future settled at 23,240.10. Two options sat equally far from it, one on each side. The 22,250 put, 4.3% below, settled at 60.55 a unit. The 24,250 call, 4.3% above, settled at 39.70. Same index, same expiry, about the same distance, and the put cost about half as much again. Solve each price for its implied volatility and the reason shows: 16.82% for the put and 14.43% for the call. That tilt is skew. This lesson reads it on Nifty, on a stress day and on two stocks. Every figure comes from NSE end of day files, so nothing here is live and nothing is a view on where the index goes next.
3By the end you can
- Tell a smile, which is curvature, from a skew, which is slope, on a dated NSE chain.
- Measure the skew and the curve from two wings at the same distance from the forward.
- Say why one volatility for every strike misprices the wings.
The idea, plainly
Volatility smile or skew: what is the difference?
Black 76 prices an option from a few inputs, and one of them, volatility, is meant to be a single number for the index. If it were, every strike of one expiry would give the same implied volatility and the line across strikes would be flat. It never is. Plot the implied volatility of each strike and you get a curve.
Skew = put wing IV
less call wing IV
Curve = average of wings
less at the money IV
Read 4 more paragraphs, 240 words
Two words describe the curve, and people swap them. A smile is curvature: both wings sit above the middle, like a U. A skew is slope: one wing sits above the other. A curve with a lean and a small bend is a smirk, and it is the usual shape for an equity index. Two numbers cover most of it.
A wing is a strike a fixed distance from the forward. Desks fix the delta instead, at 25 delta, and call the two numbers the risk reversal and the butterfly; the skew measures module does that. Here I use distance, because anyone can read it off a chain. Distance has a catch: four percent is far for a weekly and near for a quarterly, so delta is the fairer yardstick when expiries differ.
Use the out of the money option on each side: puts below the forward, calls above it. They are the liquid ones, and by put call parity the in the money option on the same strike gives the same implied volatility. Strikes with no trades are dropped, because the exchange computes their settlement price rather than reading it from a trade.
The NSE option chain page prints an IV column beside each price. Its numbers come from the exchange's own method and can differ a little from the ones below, which are RupeeCase's own Black 76 solve of the settlement prices. Compare wings from one source only.
Why do puts cost more at the same distance?
Three explanations are common, and a chain cannot tell them apart. Holders of shares buy puts as protection, and that demand lifts their price. Index falls tend to come faster than rises, so the left tail is heavier than a lognormal curve allows. And volatility itself tends to rise when the index falls. Each is a story about demand and risk, not a rule that holds every day. The stocks below show a day on which it does not.
Worked example: three dated chains
Two terms to hold on to from 16.7
What does the Nifty smile look like on 10 Jun 2026?
Start with the two prices from the opening, side by side.
At about the same distance, the put cost half as much again
Now the whole chain. The expiry is the June monthly, so at the money is read at the future. At the money implied volatility is 15.03%.
The Nifty smile leans to the downside, with a small bend on the right
Read one more paragraph, 53 words
The put wing, the 22,250 strike, reads 16.82%. The call wing, the 24,250 strike, reads 14.43%. The skew is 2.39 vol points. The wings average 0.59 points above the middle, a small bend. Further out the right side turns up: at 8.2% above the future, the 25,150 call reads 16.62%.
Why does it matter for the price?
The implied volatility solver module shows how each strike's figure is found. Price the 22,250 put at the at the money volatility, one number for every strike, and Black 76 gives 41.44. The market settled it at 60.55. The flat line puts it 32% too low. The call goes the other way: the flat line gives 45.88 against a settlement of 39.70. A single volatility misprices both wings, and in opposite directions. The gap is what the buyer of the put pays for protection and what its seller is paid for carrying gap risk. Whether it is fair is a separate question that one chain cannot answer.
Read one more paragraph, 50 words
The smile is also already inside every spread price. The vertical debit spreads module priced two legs from two settlement prices, and each leg carried its own implied volatility. A put spread and a call spread at equal distances do not cost the same, and skew is one reason why.
What changes on a stress day?
Monday 7 Apr 2025 was a day of a sharp fall, and India VIX closed at 22.79. Read the April monthly, expiry 24 Apr 2025, the same way. A known event moves the curve too, which the events and IV crush module follows through the Budget of 1 Feb 2026.
On a stress day the left side of the smile is far steeper
The skew was several times wider on the stress day
Read one more paragraph, 93 words
The whole curve moved up, not only the left side. At the money implied volatility was 25.04%, against 15.03% on the calm June day. The put wing rose by far more than the call wing, which is why the gap widened. The 21,300 put read 31.73% and the 23,250 call read 20.97%, a gap of 10.76 vol points, against 2.39 on the calm June day. Nifty Bank on 10 Jun 2026 sits between them: the 53,000 put read 20.91%, the 57,400 call read 17.45%, a gap of 3.46.
Is it the same for stocks?
No. The same measure on stock options of 10 Jun 2026 gives a different picture. A large private bank stock, about four percent either side of the forward, has its call wing at 770 reading 26.33% and its put wing at 710 reading 23.39%. The call side sits 2.94 vol points above the put side, the opposite tilt to the index, and the curve bends up on both sides, a smile proper.
A bank stock leaned the other way: calls richer than puts
Read one more paragraph, 58 words
For a large conglomerate stock on the same day the two wings read 26.94% and 26.99%, within 0.05 vol points of each other, almost flat. The sign of the tilt is a fact about one stock on one day, not a law. Stocks have lumpy news, results and corporate actions, and their smiles can lean either way.
The common mistake
The claim: A steep put skew means the market expects a crash.
Skew is a price. It says what protection costs next to upside calls, and that price bundles demand for hedges, fear and the shape of the tail. The widest gap in these chains, 10.76 vol points, came on a day when the fall had already happened. The price of protection is not a forecast. The mistake that costs more in practice runs the other way: pricing every strike with one volatility. The 22,250 put comes out 32% too low on the flat line, and the call too high. Read the curve before you read the number.
Key takeaways
- A smile is the curve across strikes. A skew is its tilt.
- In these chains index puts carried more implied volatility than equally distant calls.
- The gap was several times wider on the stress day.
- Stock options can lean either way, or stay flat.
- Skew is the price of protection, not a forecast of a fall.
- One flat volatility misprices both wings of the chain.
The term this section turns on: Wing
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study