Surface, smile, skew

The surface as one object

For a given underlying, every (strike, expiry) pair has its own IV. Plotted together they form a surface. The pro terminal's SURFACE panel renders this in 3D, strike on one axis, expiry on another, IV as the height, and lets you tilt the camera to inspect specific regions.

You can render the surface for any greek (delta, gamma, theta, vega) or for risk-neutral probability, see the options summary for the IV vs greek distinction. The default and most common read is IV.

Smile

A smile is the IV curve across strikes for a single expiry, one slice of the surface. Plotted by strike (or by delta), it almost always shows higher IV at the wings (deep OTM puts and calls) than at the money. That curvature is the smile.

The smile shape encodes how the option market prices tail risk. A flat smile means OTM options are cheap relative to ATM, unusual, often signals an illiquid chain. A steep smile means tail protection is expensive on both sides.

Skew

Skew is the asymmetry of the smile, specifically, the difference between OTM put IV and OTM call IV at the same delta (typically 25Δ). The standard convention:

• Positive skew (puts > calls), fear bid. The market is paying up for downside protection. Common in equities and during crypto sell-offs.
• Negative skew (calls > puts), greed bid. The market is paying up for upside. More common in crypto during powerful rallies (call buying frenzy).

The SKEW panel plots 25Δ skew as a term structure across expiries. Front-end skew is more reactive; back-end skew is structural. A steep front-end positive skew with a flat back end signals near-term fear without long-term concern.

Risk reversal (RR)

A risk reversal is a specific position: long an OTM call, short an OTM put (or reverse). The 25Δ risk-reversal "price" is essentially the skew expressed as a tradeable structure. The RISKREV panel plots the 25Δ RR term structure, same data as skew, framed as a position rather than a metric.

Butterfly (BFLY)

A butterfly is the smile's curvature at a given expiry, how much premium OTM wings carry over and above ATM. Computed as the average of the 25Δ call IV and 25Δ put IV minus ATM IV ((25Δ call + 25Δ put)/2 − ATM).

High butterfly = tail premium is rich, smile is steep on both sides. Low butterfly = tails are cheap relative to ATM. The BFLY panel plots BF term structure, useful when structuring iron flies or condors.

Volatility surface fit (VOLFIT)

The VOLFIT panel fits an SVI (stochastic volatility inspired) parametric surface to the live chain and surfaces the residuals, for each contract, market IV minus model IV. Contracts with large positive residuals are "rich" (overpriced relative to a smooth surface); large negative residuals are "cheap" (underpriced).

Useful for spotting mispricings: a single strike that's 2 vol points above the surface fit is paying you to sell; one 2 points below is paying you to buy. The technique is standard desk practice on equity vol books and works the same way on crypto, with the caveat that the SVI model assumes no jumps, which crypto has.

Calendar basis (BASIS) and forward (FORWARD)

The BASIS panel plots the implied futures basis along the curve, how much the implied forward differs from spot at each expiry. The FORWARD panel computes implied-forward prices via put-call parity for every expiry.

When implied forwards move sharply for a given expiry without a matching move in spot, the option chain is pricing a known event (a stock-split equivalent in crypto, an unlock, a fork). Worth watching even when nothing else has moved.