Smile Ratio
The put-wing vs call-wing IV ratio — a compact skew-dominance metric.
Definition
The ratio of 25-delta put IV to 25-delta call IV. A compact summary of which side of the smile carries richer vol.
Formula
smile_ratio = put_25d_iv ÷ call_25d_iv
Typically > 1 for equity indexes due to structural put richness from crash-risk premium.
Inputs
put_25d_ivcall_25d_iv
Output
smile_ratio (unitless)
Interpretation
- > 1.2: put-side dominant. Fear priced into downside wing.
- ≈ 1.0–1.1: typical equity regime.
- < 1.0 (call skew): rare — signals squeeze / takeout speculation or severe complacency.
API Reference
Endpoint
GET /v1/volatility/{symbol}
Tier
Growth
Response field
smile_ratio, expiries[].smile_ratio
Why Smile Ratio Matters for Trading
TL;DR
Smile ratio is put-wing IV divided by call-wing IV. > 1 is normal equity; extreme values on either side signal regime shifts.
- What it measures
- A simple ratio that compresses the skew picture into one number.
- What it signals
- Which side of the smile has the premium. High = puts rich (bearish pricing). Low = calls rich (bullish pricing or takeout speculation).
- Why we measure it
- Skew is typically reported as a difference in vol points; the ratio is more comparable across ticker IV levels.
- Who uses it
- Swing traders, vol traders, equity-event specialists (takeovers, squeezes).
How to read Smile Ratio
High ratio (> 1.2)
- Put wings richer than call wings
- Deep fear priced in
- Contrarian long setups
- Typical at local bottoms
Good for: contrarian longs, put-ratio sellers
Low ratio (< 1.0)
- Call wings richer than puts
- Often signals takeover speculation or squeeze
- Short-call strategies get run over
- Rare — verify with volume
Bad for: naked short calls
1.0–1.1
- Typical equity regime
- No smile-based edge
- Trade on other factors
- Default reading
Normal
Rules of thumb
- Compare to ticker's own history. SPX ratio lives around 1.15; single stocks vary widely. Use percentile ranks.
- Low ratio on single stocks = M&A signal. A persistent smile ratio < 1 on single names often precedes announcements.
- Pair with skew and tail convexity. Ratio is level; skew is slope; tail convexity is curvature. All three together.
- Per-expiry ratio is most useful. The full-chain ratio averages; per-expiry surfaces event-specific smile shifts.
- Event days distort temporarily. Earnings and M&A rumors move the ratio sharply for 1-2 sessions.
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