What is volatility smile?Volatility Smile

Implied volatility plotted across strikes is higher at both ends than in the middle, like a smile, meaning the market sees big moves either way as more likely than theory assumes.

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Advanced Option Strategies
The Volatility Smile and Skew
For the same stock and expiration, different strikes have different implied volatilities. Downside puts on stocks are often pricier: the market charges extra for "crash" insurance.

Related terms

strike price
implied volatility (IV)
volatility skew

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