Volatility Skew Options Interview Guide
Volatility skew options interview guide covering puts versus calls, crash risk, supply-demand imbalance, examples, and caveats.
Candidates discussing downside risk, demand imbalance, and option pricing.
Skew compares implied vol across strikes
Volatility skew describes how implied volatility differs between downside, at-the-money, and upside options for the same expiry.
Downside demand can steepen skew
Equity index puts often trade at higher implied volatility because investors value crash protection and dealers manage tail exposure.
Concrete example
If out-of-the-money puts become expensive before a risk event, skew can steepen even if at-the-money volatility moves modestly.
Skew has multiple causes
Leverage effects, jump risk, supply-demand pressure, structured-product flow, and dealer inventory can all influence skew.
Common mistakes
Candidates often assign one universal explanation. A stronger answer names asset class, maturity, market regime, and flow context.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.