Fin Nifty (FINNIFTY) Volatility Skew
Skew summary
ATM IV and 25-delta skew: monthly contract ATM IV right axis, skew (25Δ put IV − 25Δ call IV) left axis. Monthly contract, rolled on expiry day. Drag the chart or the date axis to go back to July 2024.
Each point is the implied volatility of the out-of-the-money option at that strike (puts below the forward, calls above), from its closing price (Black-76 off the same-expiry futures close, or put-call parity when no such future exists). Strikes whose OTM option did not trade in the session are left out, because their closing price is stale.
What our backtest found NSE bhavcopy, 8 Jul 2024 – 7 Oct 2026
Fin Nifty (FINNIFTY) Volatility Skew: What It Shows
The idea in one line
Volatility skew is the pattern of implied volatility (IV) across strikes of one expiry. If every strike of FINNIFTY had the same IV the line would be flat; in practice it usually curves, and the shape tells you how the market is pricing moves in each direction.
How each point is calculated
For every strike we take the closing price of the out-of-the-money option: puts below the forward price, calls above it. We then solve the Black-76 model for the volatility that reproduces that price, using the same-expiry futures close as the forward, or put-call parity when no such future exists. Time to expiry is counted in calendar days.
Why only out-of-the-money options
Out-of-the-money options are the ones that actually trade in size away from the money, and their price is almost all time value, so the IV they give is cleaner. Strikes whose option did not trade in the session are skipped, because a closing price with no trades behind it is stale.
How Traders Read the FINNIFTY Skew
Put skew
For indices like Nifty, IV is usually higher for low strikes than for high ones. Buyers pay more for downside protection than for upside, because markets tend to fall faster than they rise. The steeper the left side, the more the market is paying for that protection.
The lowest point
The strike with the lowest IV is marked on the chart. For index options it often sits a little above the current price. If it moves, the market is re-pricing which direction looks cheaper to own.
25-delta skew
A common single number for skew is the IV of the 25-delta put minus the IV of the 25-delta call. A higher value means downside options are relatively more expensive. The small history chart shows this number and the ATM IV for the selected expiry, session by session.
Compare with the previous session
The dashed line is the same expiry one session earlier. A whole-curve shift up or down is a change in overall IV; a change in tilt is a change in skew. Both are worth separating when you read the market.
Limitations
End-of-day prices
The curve uses NSE closing prices for the session, not live quotes. Thinly traded far strikes can still carry a noisy close even when they traded.
Model choices matter
IV depends on the forward and the time to expiry used. Different platforms use different conventions, so their numbers can differ by a few tenths of a point.
Not a forecast
Skew describes how options are priced, not where FINNIFTY will go. It is one input among many and does not say whether any option is cheap or expensive for you.
FINNIFTY Skew, IV Regime and the Backtest
Skew history with candles
The ATM IV and 25-delta skew of the monthly contract (rolled on expiry day, history from July 2024) are drawn under FINNIFTY candles with EMA 20, 50, 100 and 200, so you can see how protection costs moved with the price. The sentiment score reads a steeper-than-usual skew and rising IV as bearish.
Does skew predict direction?
Not reliably. Stocks with the steepest put skew did slightly better than NIFTY over the next five sessions (+0.21%), the opposite of US studies, while NIFTY and BANKNIFTY skew gave no consistent direction.
FINNIFTY Volatility Skew: Frequently Asked Questions
What is volatility skew in FINNIFTY options?
It is how implied volatility changes from low strikes to high strikes within one expiry. The chart above plots it for the selected FINNIFTY expiry from the latest NSE end-of-day data.
Why is IV higher for lower strikes?
Demand for downside protection makes out-of-the-money puts relatively more expensive, which shows up as higher IV on the left side of the curve. This is normal for equity indices.
What is the 25-delta skew?
The IV of the put with a delta near -0.25 minus the IV of the call with a delta near +0.25. It summarises the tilt of the curve in one number.
Why are some strikes missing from the line?
A strike is left out when its out-of-the-money option did not trade in the session. The closing price of an untraded contract is stale and would give a misleading IV.
Why does my broker show slightly different IV?
Platforms differ in the forward price, interest rate and day count they use, and in whether they use the last trade or a quote. Small differences of a few tenths are expected.
Does a steep skew mean the market will fall?
No. A steep skew shows that protection is in demand and priced higher. It describes positioning and pricing, not the future direction of FINNIFTY.
Volatility Skew for other indices & stocks
Data: NSE F&O bhavcopy (end of day). This page explains how market participants commonly read this data. It is for education only and is not a recommendation to buy or sell any security.