25-Delta Skew

The 25-delta skew is a standard convention for quantifying volatility skew: the difference in implied volatility between the option whose delta is near 0.25 on the put side and the option whose delta is near 0.25 on the call side, at the same expiration. Because it condenses the full skew curve into one comparable figure, it is the number most often quoted when traders describe skew as steepening or flattening.

The 25-delta strikes are chosen because they sit a meaningful distance out of the money on both sides while remaining liquid enough to price reliably, giving a consistent, comparable reference point across different underlyings and expirations - a convention borrowed from FX and broader equity volatility markets rather than something specific to SPX.

The 25-delta skew is effectively a volatility spread between two specific options - sometimes described as a risk reversal. In equity indices, the reading is typically positive: put implied volatility sits above call implied volatility, reflecting the market's persistent demand for downside protection. A rising 25-delta skew number means that gap is widening; a falling one means it is narrowing.

It complements the broader volatility skew concept rather than replacing it. The general skew page describes the overall shape and drivers of the pattern across all strikes; the 25-delta skew is the specific, standardized number analysts and traders track over time, session to session, to quantify how that shape is shifting.

Like other options-derived metrics, the 25-delta skew is a snapshot of current pricing, not a forecast, and it can be noisy on any single reading, especially around wide bid-ask spreads in the underlying options. It is most informative viewed as a trend over multiple sessions rather than a single point-in-time value.

The 25-delta point is a middle ground on the skew curve: closer to the money than the far '10-delta' wings sometimes quoted for deep tail risk, but far enough out to reflect genuine directional skew rather than the noise that can affect at-the-money option pricing. Some venues and desks quote both a 25-delta and a 10-delta skew figure together, with the 10-delta version generally more sensitive to tail-hedging demand specifically.

The 25-delta skew is typically expressed in implied-volatility points - for example, a reading of 'plus four vol points' means the 25-delta put's implied volatility sits four percentage points above the 25-delta call's. Tracking that number across sessions, rather than any single reading in isolation, is how the metric is generally used to gauge whether relative demand for downside protection is building or easing.

The 25-delta skew can be computed separately for different expirations on the same underlying, producing a skew term structure of its own: near-term expirations, including 0DTE, often show a different skew reading than monthly or quarterly expirations on the same day, reflecting different investor bases and different hedging horizons layered onto the same underlying.