What It Means
Volatility skew is the pattern where implied volatility differs across strikes and expiries for the same underlying, instead of staying flat. On index options like Nifty, it usually shows up as higher IV on out-of-the-money puts than on out-of-the-money calls sitting the same distance from spot.
How It Works
Skew exists because option demand isn't symmetric. More traders and fund managers buy puts to hedge against a market fall than buy calls purely to speculate on a rise, and that extra demand pushes put IV higher on its own, independent of what's happening on the call side. The same effect shows up across expiries: a stock's monthly options can carry different IV than its next-month options for the identical strike, especially when an event like earnings falls inside one expiry but not the other.
Example
A Pune-based equity investor pulls up the Nifty chain with spot near ₹22,150. The 21,950 put, 200 points out of the money, shows an IV of 14.8%. The 22,350 call, the same 200 points out on the other side, shows only 12.1%. Same distance from spot, same expiry, different IV. That gap is the skew, and it points to more traders paying up for downside protection than for upside bets right now.