Volatility · Lesson 04 of 5 · Concept
Volatility skew
Black-Scholes assumes one volatility for every strike on an expiry; real chains do not behave that way. Solved across the NIFTY calls of 23 September 2026, implied volatility fell from 12.22% at the 23,200 strike to 10.18% at 23,600 — a two-point slope across a single expiry.
NIFTY calls, 23 September 2026 open, spot 23,357.60, 6 days to expiry · implied solved from traded premiums
A downward slope across the board
Solving each call on that chain separately gives a different volatility for each strike: 12.22% at 23,200, then 10.93%, 11.17%, 11.15%, 10.92%, 10.74%, 10.47%, 10.34%, and 10.18% at 23,600.
The direction is the one equity index chains almost always show. Lower strikes carry higher implied volatility, which is to say downside protection costs more per unit of distance than upside participation does.
This is a direct contradiction of the model that produced the numbers. Black-Scholes assumes a single volatility applies to every strike on an expiry, so a chain with a slope is telling you the assumption is wrong — usefully wrong, since the slope itself is stable enough to be read.
What this particular chain will not support
Solving the puts on the same chain gives figures 1 to 2 points below the calls at identical strikes — 9.96% against 11.15% at 23,350, for instance. Under put-call parity that cannot be true: a call and a put at one strike must imply the same volatility.
The explanation is not market structure but data. Our capture stores last-traded prices, and the last trade in a call and the last trade in a put at the same strike did not happen at the same instant. On a chain where some strikes trade thinly, those timestamps can be minutes apart.
So the call series above is readable as a skew and the call-versus-put gap is not. Saying which of the two a dataset can support is part of using it, and this page would rather show the limitation than quietly present the tidier half.
Common questions
What is volatility skew?
The pattern of implied volatility varying across strikes within one expiry. Equity index chains typically show higher implied volatility at lower strikes: NIFTY calls on 23 September 2026 ran from 12.22% at 23,200 down to 10.18% at 23,600.
Why do puts and calls at the same strike show different implied volatility?
In principle they should not — put-call parity requires them to match. Differences usually come from non-synchronous last-traded prices rather than from the market, which is the case in the chain shown here.
Written and maintained by MarketCue research
How these figures are produced
Every price on these pages was traded on the exchange and is read from our own option-chain capture, which records the NIFTY and SENSEX chains once a minute through the session. Each page names the session its figures come from.
Figures that a model produced rather than the market — the Greeks, implied volatility — are labelled as model outputs wherever they appear, and never presented beside traded prices without saying which is which. The pricing is checked against published reference values on every change.
Where our own data cannot support a claim, the page says so instead of generalising. MarketCue is not a registered investment adviser, research analyst or broker under SEBI regulations.