A data-driven guide using 10 years of real SPY options data (2016–2026) to show you exactlyhow volatility skew and term structure affect every short premium entry you make.
Part 1: The Concepts — Let’s Start Simple
Imagine you’re buying car insurance. You pay a monthly premium, and if something bad
happens, the insurance company covers the damage. Options work exactly the same way.
When you sell options, you are the insurance company — you collect the premium upfront and
take on the risk.
Now here’s the question every option seller needs to answer before every single trade: Is the
premium I’m collecting actually worth the risk I’m taking on?
Two things — skew and term structure — answer that question every time you open an options
chain. Most beginners skip right past them. That’s a costly mistake.
Volatility Skew: The Fear Tax
When traders are scared that the market is going to fall, they rush to buy put options to protect
themselves — just like buying home insurance before a hurricane. All that demand for downside
protection drives put prices up relative to call prices.
This creates volatility skew: put options at lower strikes carry higher implied volatility than call
options the same distance above the market, even though both are equidistant from the current
price.
Here’s a real example from our 10-year SPY dataset. On an average day in 2020:
• The 17 delta put at 45 DTE had an implied volatility of 29.0%
• The 17 delta call at 45 DTE had an implied volatility of 16.8%
• That 12.2 percentage point gap is the skew
The market was pricing in dramatically more fear to the downside than to the upside. This is not
random — it has been permanently baked into equity options since the 1987 crash, when
markets fell 22% in a single day and traders learned that stocks can fall much faster than they
rise.
| Key insight for put sellers: You are being paid a fear premium that often exceeds the actual realized risk. The gap between what the market fears and what actually happens — that’s your structural edge as a short put seller. |
Term Structure: The Shape of Time
If skew tells you which strikes are cheap or expensive, term structure tells you which expiration
dates are cheap or expensive.
Think of implied volatility as the market’s best guess at how much SPY will move per day over
the life of an option. But the market’s guess changes depending on how far out you look. Plot
those guesses across all expiration dates and you get the term structure curve.
There are two primary states:
Normal (Contango) Term Structure: Short-dated options have lower IV than long-dated ones.
The market is calm today but uncertain about the distant future. This is the default state — most
of the time, the world looks fine right now.
Inverted (Backwardation) Term Structure: Short-dated options have higher IV than long-
dated ones. Fear is happening right now, not in the future. This shows up during market stress
events — Fed surprises, geopolitical shocks, earnings disasters.
Why this matters for your 45 DTE entries: you are specifically planting your flag at the 45-day
mark on this curve every time you enter a trade. Whether that point is expensive or cheap
relative to the rest of the curve directly determines how much edge you have on day one.
Part 2: What 10 Years of SPY Data Actually Shows
(2016–2026)
The following analysis covers 1,243 trading days of SPY options data, tracking the closest-
to-17-delta put and call at the 45 DTE expiration from January 2016 through March 2026. Every
number you see below comes directly from that dataset.
The Skew Picture Across 10 Years
The chart below shows the real quarterly skew readings from our data — the difference in
implied volatility between the 17 delta put and the 17 delta call at 45 DTE, measured every
trading day and averaged by quarter.
A few things stand out immediately from the data:
2017 was the worst year to be selling puts on SPY. Average skew sat at just 5.6 pts, peaking
at only 7.9 pts for the entire year. You were collecting thin premium in one of the calmest
markets in modern history — small credits with almost no fear cushion built in.
A few things stand out immediately from the data:
2017 was the worst year to be selling puts on SPY. Average skew sat at just 5.6 pts, peaking at only 7.9 pts for the entire year. You were collecting thin premium in one of the calmest markets in modern history — small credits with almost no fear cushion built in.
2020 Q2 through 2021 Q1 was the golden window. Skew averaged 12 to 14 pts every single quarter. Your 17 delta put was sitting more than 9% below the market and you were still collecting $3.42 or more in credit per contract. That’s the fear premium working for you at maximum force.
2024 Q1 and Q2 were the leanest recent environment, with skew dropping to 3.75 and 4.16 pts. Those are the quarters where selling puts feels easiest and safest — and where your edge is at its absolute thinnest.
Annual Breakdown: 10 Years of Real Numbers
Every number in this table comes directly from our SPY options dataset. This is the factual record of what the 17 delta put and call looked like at 45 DTE across a full decade.
| Year | Avg Put IV | Avg Call IV | Avg Skew | Peak Skew | Avg Put Credit | Avg Call Credit | Days |
| 2016 | 19.0% | 11.1% | 7.9 pts | 11.1 pts | $1.31 | $0.71 | 129 |
| 2017 | 13.1% | 7.5% | 5.6 pts | 7.9 pts | $1.05 | $0.58 | 129 |
| 2018 | 18.3% | 11.1% | 7.2 pts | 11.7 pts | $1.65 | $0.95 | 126 |
| 2019 | 19.7% | 11.4% | 8.3 pts | 12.6 pts | $1.87 | $1.02 | 113 |
| 2020 | 29.0% | 16.8% | 12.2 pts | 17.8 pts | $3.42 | $1.73 | 109 |
| 2021 | 23.4% | 12.5% | 10.9 pts | 17.2 pts | $3.35 | $1.65 | 127 |
| 2022 | 28.2% | 18.8% | 9.4 pts | 14.9 pts | $3.95 | $2.36 | 118 |
| 2023 | 19.1% | 12.7% | 6.4 pts | 10.9 pts | $2.66 | $1.68 | 128 |
| 2024 | 16.9% | 11.3% | 5.6 pts | 17.8 pts | $2.99 | $1.89 | 124 |
| 2025 | 20.5% | 12.6% | 8.0 pts | 17.5 pts | $4.21 | $2.43 | 113 |
| 2026* | 20.6% | 11.6% | 9.0 pts | 12.9 pts | $4.63 | $2.52 | 27 |
*2026 data through March 5, 2026
Notice the put credit vs. call credit columns. In every single year, the put credit is dramatically larger than the call credit — and both positions sit at the same 17 delta. In 2020, you collected $3.42 selling the 17 delta put versus $1.73 selling the 17 delta call. That is nearly double the credit for the same probability trade. That gap is skew working in your favour as a put seller. The market pays you more to take on downside risk than upside risk, even when both sides have the same probability of expiring in the money.
Put IV vs. Call IV — Side by Side
Part 3: How Skew Directly Affects Your Strike and Your Credit
Here’s something most traders never think about: when skew expands, your 17 delta put does not just pay you more — it also moves further away from the market. Both of these things are working in your favour at the same time.
Why does the strike move further? Because higher implied volatility means one standard deviation covers a wider price range. The 17 delta strike is defined as roughly one standard deviation below the market. A wider standard deviation pushes that strike further from the current price.
Here is exactly what our SPY data shows across the three skew regimes:
This chart tells the most important story in this entire article. When skew is high:
Your 17 delta put sits 9.4% below the market on average — the market needs to fall nearly 10% just to threaten your strike
You collect $3.52 in credit on average — nearly double the $1.92 you get in a low-skew environment
Your put IV is 26.7% — that inflated IV often mean-reverts, which adds to your profits as the trade moves toward expiration
When skew is low, you have the worst of all worlds: your strike is only 5.4% below the market, you’re collecting $1.92, and there’s very little fear cushion. The trade feels safe because markets are calm, but you’re the least compensated for the risk you’re taking.
The Three Skew Regimes: Full Stats
| Regime | Skew Range | Trading Days | Avg Put IV | Avg Call IV | Put Strike % OTM | Avg Put Credit | Avg Call Credit |
| Low | < 6.6 pts | 413 | 15.3% | 10.0% | 5.4% | $1.92 | $1.22 |
| Normal | 6.6–9.1 pts | 421 | 19.7% | 12.0% | 6.9% | $2.54 | $1.47 |
| High | > 9.1 pts | 409 | 26.7% | 15.4% | 9.4% | $3.52 | $1.82 |
| The critical comparison: High skew entries collect 83% more credit than low skew entries ($3.52 vs $1.92) while the put strike sits nearly 4 percentage points further from the market (9.4% vs 5.4% OTM). More distance AND more credit — simultaneously. |
Part 4: Term Structure — Reading the Curve at Your 45 DTE Entry
While skew measures the left-right fear across strikes, term structure measures the near-term versus long-term fear across time. Both forces affect your 45 DTE entry, and understanding them together gives you the most complete picture of your edge.
The easiest way to read term structure for a 45 DTE short put seller is through the absolute level of IV at your entry point compared to its recent history. When the 45 DTE put IV is running well above its 12-month average, the near-dated options are expensive relative to the term structure — that is the inverted structure signal. When IV is flat or below average, the curve is in its normal contango state and your entry point on the curve is not particularly rich.
The annual put credit chart above shows this dynamic clearly. When IV spikes — as it did in 2020 and 2022 — you are not just collecting more premium in dollar terms. You are entering at a point on the term structure curve that is abnormally elevated for the 45-day window. That premium tends to decay faster as the market stabilises, which accelerates the profit on your short position.
Credit Collected vs. IV Environment
Note that the 2025 credits ($4.21 avg) are higher than 2020 ($3.42 avg) despite lower IV. This is because SPY’s absolute price is significantly higher — the same percentage move equals more dollars. When comparing credit across different years, always think about the credit as a percentage of the strike price, not just the raw dollar amount.
Part 5: The Skew Regime Entry Framework
Now we bring it all together into something you can use before every trade. Based on the full 10-year SPY dataset, we define three entry regimes using the actual percentile breakpoints from the data.
The three regime boundaries are not arbitrary — they are the 33rd and 67th percentiles of all 1,243 daily observations in our dataset:
- Low skew: below 6.6 pts (bottom third of all days)
- Normal skew: 6.6 to 9.1 pts (middle third)
- High skew: above 9.1 pts (top third)
When Did Each Regime Actually Occur?
Knowing the regimes is useful. Knowing when they show up and why is what turns theory into real-world awareness. Here is the full quarterly timeline coloured by regime.
Here is how the major market events in our dataset mapped to each regime:
High skew periods (maximum edge for put sellers):
- 2016 Q1 — China slowdown scare and oil crash pushed skew to 9.3 pts average
- 2019 Q3 — US-China trade war escalation and beginning of rate cut cycle, 9.4 pts
- 2020 Q2 through Q4 — COVID crash and recovery, 11.8 to 14.3 pts, the highest in the dataset
- 2021 Q1 — Post-COVID volatility hangover, GameStop/Reddit squeeze, 12.6 pts
- 2021 Q3 and Q4 — Delta variant fears, early inflation signals, 10.6 to 11.2 pts
- 2022 Q1 and Q2 — Fed rate hike cycle begins, Ukraine invasion, 10.9 to 11.7 pts
- 2025 Q2 — Tariff shock, Fed policy uncertainty, 9.4 pts
Low skew periods (thin edge — be cautious):
- All of 2017 — Lowest IV year in the dataset, entire year below 7 pts, three out of four quarters below 6 pts
- 2024 Q1 and Q2 — Goldilocks bull market, AI-driven rally, VIX structurally suppressed: 3.75 and 4.16 pts, the two lowest quarters in the entire 10-year dataset
Part 6: The Practical Entry Decision
Let’s put everything into a clear process you can run before every 45 DTE short put entry on SPY.
Step 1 — Calculate Skew Right Now
Open your options chain. Find the 17 delta put IV and the 17 delta call IV at the 45 DTE expiration. Subtract the call IV from the put IV. That single number tells you which regime you are in:
- Below 6.6 pts: Low skew — reduce size by 30 to 50% or wait for a better entry
- 6.6 to 9.1 pts: Normal skew — standard entry at normal size
- Above 9.1 pts: High skew — this is where the edge is, trade at full size
Step 2 — Check the Absolute IV Level
Take today’s 45 DTE put IV and compare it to the 12-month average for SPY. If it is more than 15% above the recent average, near-term options are elevated and the term structure is working in your favour. You are collecting inflated short-term premium on top of the skew premium.
Step 3 — Apply the Entry Grid
| Regime | Skew | IV Level | What to Do | Real-World Examples |
| Thin edge | Low (<6.6 pts) | Normal | Reduce size 30–50% or wait | All of 2017, 2024 Q1/Q2 |
| Caution zone | Low (<6.6 pts) | Elevated | Half size, watch for skew to widen | Early panic days before skew catches up |
| Good entry | High (>9.1 pts) | Normal | Full standard size | Most common high-edge entry, 2016 Q1, 2019 Q3 |
| Maximum edge | High (>9.1 pts) | Elevated | Full or oversize within risk rules | 2020 Q2–Q3, 2022 Q1, 2025 Q2 |
Part 7: The Numbers That Matter — Your Reference Table
Bookmark this. These are the real 10-year SPY numbers that define what ‘normal,’ ‘cheap,’ and ‘expensive’ look like for a 17 delta, 45 DTE short put:
| Metric | Low Environment | 10-Year Average | High Environment |
| 17Δ put IV | ~13–15% | ~19% | ~26–29% |
| 17Δ call IV | ~7–10% | ~12% | ~16–19% |
| Skew (put − call IV) | ~4–6 pts | 8.1 pts | ~10–14 pts |
| Avg put credit | ~$1.05–$1.92 | ~$2.54 | ~$3.35–$3.95 |
| Avg call credit | ~$0.58–$1.22 | ~$1.47 | ~$1.65–$2.36 |
| Put strike % OTM | ~5.4% | ~6.9% | ~9.4% |
| Real-world years | 2017, 2024 Q1/Q2 | 2016, 2018, 2023 | 2020, 2021, 2022 |
| The most important number to internalize: The 10-year average skew on SPY at 17 delta, 45 DTE is 8.1 pts. That is your baseline. Anything below 6.6 pts means below-average compensation. Anything above 9.1 pts means you are in the top third of all entry environments across a full decade. |
FAQs
What exactly is volatility skew and why does it exist in SPY?
Volatility skew is the difference in implied volatility between put options and call options at the same delta. In SPY, puts almost always carry higher IV than equidistant calls because equity markets have an asymmetric risk profile — they can fall much faster and further than they rise. Since the 1987 crash, institutional investors have consistently paid extra for downside protection, creating a permanent fear premium on the left side of the options chain. This fear premium is what short put sellers are collecting every time they sell a 17 delta put.
Why do we use 17 delta as our standard entry point?
The 17 delta strike sits approximately one standard deviation below the current market price at 45 DTE. This means the market assigns roughly an 83% probability of this option expiring worthless. It is far enough out of the money to give the position meaningful breathing room, but close enough to the money to collect a worthwhile premium. Across 10 years of SPY data, the average 17 delta put credit ranged from $1.05 in the quietest environments to $3.95 in the most volatile, giving put sellers a meaningful and consistent income stream.
What is term structure and how does it affect my 45 DTE entry?
Term structure is the curve of implied volatility across different expiration dates. In normal (contango) conditions, longer-dated options carry higher IV than shorter-dated ones. When the market is stressed, this curve inverts — near-term options become more expensive than longer-dated ones because fear is happening right now. As a 45 DTE short put seller, you benefit when the term structure is inverted because your specific entry point on the curve is inflated. That elevated premium tends to decay quickly as conditions stabilise, accelerating your profit.
How do I know if skew is high or low on any given day?
The simplest method: open SPY options at the nearest 45 DTE expiration. Find the implied volatility of the 17 delta put and the 17 delta call. Subtract the call IV from the put IV. Based on 10 years of data, anything below 6.6 pts is the low-skew regime (bottom third historically), 6.6 to 9.1 pts is normal, and anything above 9.1 pts puts you in the high-skew regime where your edge is greatest. The all-time average from 2016 through 2026 is 8.1 pts.
Does high skew mean the trade is more dangerous?
High skew means the market is more fearful, not necessarily more dangerous for a put seller. In fact, our data shows that high-skew environments produce both higher credits ($3.52 average vs $1.92 in low skew) and a strike that sits further from the market (9.4% OTM vs 5.4% OTM). You are being paid more and given more distance simultaneously. The real danger for short put sellers is low-skew environments — where thin premium provides almost no cushion against an unexpected move.
Why was 2017 such a bad year for short put sellers?
2017 was the lowest-IV year in our 10-year dataset. The 17 delta put averaged just $1.05 in credit with a skew of only 5.6 pts. SPY essentially drifted upward all year with almost no volatility. Put sellers were collecting very little premium while the underlying kept appreciating, meaning the dollar-for-dollar reward for taking on downside risk was at its lowest. It is a reminder that calm markets are not necessarily friendly markets for premium sellers — they are the markets where you are paid the least for the risk you carry.
What happened to skew during COVID in 2020?
The COVID crash produced the most extreme skew readings in our dataset. In 2020 Q2, average skew hit 14.3 pts and the average 17 delta put credit reached $3.42 per contract — more than double the 2017 average. The peak single-day skew in the dataset reached 17.8 pts. This represents exactly the kind of environment where disciplined put sellers, who stayed systematic and continued entering trades, earned their best returns. Fear was at maximum, premium was fat, and the market’s subsequent recovery meant those far-out-of-the-money puts expired worthless in many cases.
Should I stop selling puts entirely when skew is low?
Not necessarily, but you should right-size. In the low-skew regime, reduce your position size by 30 to 50%. You are still generating income — just less per contract — and the risk-reward is less favourable. An alternative is to wait: low-skew environments often precede volatility spikes, and a patient seller who waits for skew to expand above 9 pts will enter with much better terms. The data supports this clearly: $1.92 average credit in low skew versus $3.52 in high skew is a difference that compounds meaningfully over a full year of entries.
How does the 17 delta call credit compare to the put credit?
Significantly less in every single year of the dataset. In 2020, the average 17 delta put collected $3.42 while the 17 delta call collected $1.73 — put sellers were paid nearly double. Over the full 10-year period, the average put credit was $2.54 versus the average call credit of $1.47 in the normal skew regime. This is why our short premium strategy focuses on puts rather than calls for SPY. The structural skew permanently inflates put prices above call prices, giving put sellers a built-in advantage that call sellers do not have.
What does 45 DTE mean and why is it our standard entry?
DTE stands for Days to Expiration. 45 DTE means we sell options with 45 days left until they expire. This timeframe sits in the sweet spot of theta decay — the rate at which an option loses value over time accelerates meaningfully in the 30 to 45 day window. By entering at 45 DTE and managing the trade at 15 DTE (closing with 15 days remaining), we capture the fastest part of that decay curve while avoiding the unpredictable gamma risk that spikes in the final two weeks before expiration.
Conclusion and Key Takeaways
Skew and term structure are not advanced concepts. They are simply measurements of where the fear is — across strikes and across time. As a short premium seller, understanding these two forces tells you when the market is overpaying for insurance and when it is paying you a fair price.
Ten years and 1,243 trading days of SPY data makes the message unmistakable:
The worst time to sell puts is when markets are calm, skew is compressed to 3 to 5 pts, and IV is running below 14%. You feel safe, everything looks easy, but you are collecting the least credit with the least distance between your strike and the market. 2017 and early 2024 are the textbook examples.
The best time to sell puts is when skew is above 9 pts, IV is elevated, and the market is scared. Your 17 delta strike sits more than 9% below the market and you are collecting $3.50 or more in credit per contract. The trade feels uncomfortable to put on. That discomfort is exactly why the premium is so fat.
The Four Rules to Remember
- back, 6.6 to 9.1 pts is standard, above 9.1 pts means full size.
- High skew gives you two benefits simultaneously — more credit and a strike further from the market. You are not just getting paid more; you are also getting more protection for that payment.
- The credit difference between regimes is dramatic. Low skew averages $1.92 per contract, high skew averages $3.52. Over a full year of entries, that gap compounds into a significant difference in total premium collected.
- Never confuse a calm market with a safe trade. The calmest environments in our dataset are also the periods where your edge as a put seller was thinnest. Fear, measured by skew, is your friend as a premium seller.
Disclaimer
All data from SPY options, 2016–2026, 1,243 trading days. Analysis based on the closest-to-17-delta put and call across all available 38–52 DTE expirations on each trading day. Past performance does not guarantee future results. Options trading involves significant risk of loss and is not suitable for all investors.
