Crypto glossary
Volatility skew (25-delta skew)
Volatility skew is the gap in implied volatility between puts and calls; in crypto the 25-delta skew is a widely watched gauge of fear or greed.
Options at different strikes rarely trade at the same implied volatility. Skew measures that difference. The most quoted version in crypto is the 25-delta risk reversal: implied volatility of a call with a delta of 0.25 minus that of a put with a delta of -0.25, for the same expiry. A positive value means upside calls are pricier, a negative one that downside puts are in greater demand.
Analytics firms publish skew for bitcoin and ether options by tenor, from one week to six months, and crypto media cite it to describe positioning: puts trading at a premium before a macro event signal demand for protection, while calls at a premium during rallies show traders chasing upside. Unlike equities, where puts almost always carry a premium, crypto skew often flips sign.
Skew reflects option prices, not a forecast. It can be distorted by large structured trades, by flows from yield products that sell calls, or by a single fund hedging. It is best read together with term structure, open interest and funding rates.
Example
A week before a major US inflation release, the one-week 25-delta skew on bitcoin drops from +2 to -6 volatility points as traders pay up for puts.