Option Smile and Skew Viewer
AlgoTest's Strategy Builder now supports a dual view of the option volatility surface directly inside the Strategy Builder. This includes:
- Fixed Strike IV Curve
- Floating Strike IV Curve (Delta-based moneyness)
These views help you visualize volatility smiles and skews for optionable stocks and indices in real-time.
What Is the Volatility Smile/Skew?​
Options across different strikes do not have the same implied volatility (IV). The plot of IV vs strike often forms a curve, commonly referred to as a smile or skew.
- A smile occurs when both OTM puts and calls have higher IV than ATM.
- A skew refers to asymmetry, e.g., puts having more IV than calls or vice versa.
AlgoTest helps you visualize this curve in two ways.
1. Fixed Strike View​
Plots implied volatility against absolute strike prices.
Key Use Case:​
- Helps in understanding how IV behaves across strikes for the same expiry.
- Useful for identifying cheap/expensive strikes before placing spreads or wings.
2. Floating Strike View​
Plots IV against delta-based moneyness (e.g. using 0.25Δ Put, ATM, 0.25Δ Call etc.).
Key Use Case:​
- Normalizes skew for changing spot prices.
- Better for comparing skews across stocks or time periods.
Where to Find It​
-
Go to Strategy Builder
-
Choose any optionable symbol
-
Navigate to the IV Graph / Skew section
-
Toggle between:
- Fixed Strike
- Floating Strike (Delta view)
Available for all optionable stocks and indices
Use Cases​
| Scenario | View to Use | Why |
|---|---|---|
| Selecting wings for Iron Condor | Fixed Strike | Helps detect cheapest OTM strikes |
| Comparing skew between stocks | Floating Strike | Delta-normalization makes comparison fair |
| Building volatility spreads | Both | Combine insights to find edge |
We’d love to hear your feedback at support@algotest.in or in our Telegram community.