> For the complete documentation index, see [llms.txt](https://guide.laevitas.ch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.laevitas.ch/laevitas-metrics/10d-25d-skew-risk-reversal.md).

# 10Δ 25Δ Skew/ Risk Reversal

{% hint style="info" %}
10Δ 25Δ Skew: This metric measures the Skew values across different time periods by rolling maturity calculated by the following formula (source: Mixon):\
Skew (10-Delta 1M) = ((IV 10 Delta put 1M – IV 10 Delta call 1M)/ATM IV 1M)) \* 100\
\
10Δ 25Δ Risk Reversal: This metric measures the difference between the Implied Volatility of puts and calls with similar delta (10-delta or 25-delta) in the same expiration using the following formula:\
RR (10-Delta 1M) = IV (10-Delta call 1M) – IV (10-Delta put 1M)
{% endhint %}

### **10Δ (10-Delta) Skew**

The 10 delta (10∆) skew measures the price of a call option with a delta of 0.10 and the price of a put option that has a delta of 0.10. If the skew increases then puts are becoming more expensive than calls; if the skew decreases, call premiums are going up against puts premiums.

The 10-Delta Skew is a measure of volatility skew calculated by the following formula (source: Mixon):

Skew (10-Delta 1M) = (IV 10 Delta put 1M – IV 10 Delta call 1M)/ATM IV 1M

### **25Δ (25-Delta) Skew**

The 25 delta (25∆) skew measures the price of a call option with a delta of 0.25 and the price of a put option that has a delta of 0.25. If the skew increases then puts are becoming more expensive than calls; if the skew decreases, call premiums are going up against puts premiums.

The 25-Delta Skew is a measure of volatility skew calculated by the following formula (source: Mixon):\
\
Skew (25-Delta 1M) = (IV 25 Delta put 1M – IV 25 Delta call 1M)/ATM IV 1M

## Risk Reversal Option Strategy

A Risk Reversal is an option combo trade that consists of selling (that is, being short) an out-of-the-money Put and buying (i.e. being long) an out-of-the-money call, with both options expiring on the same expiration date.

![](/files/YySJjWKKbOLhcIHynDIF)

Often traders will look at the “25 risk reversal” which is the volatility of the 25 delta (out of the money) call less the volatility of the 25 delta (out of the money) put for a given maturity.

A negative risk reversal means the volatility of puts is greater than the volatility of similar delta calls, **which implies more market participants are betting on a drop in the currency than on a rise, and vice versa if the risk reversal is positive.**

### **10Δ (10-Delta) Risk Reversal**

Historical 10-delta Risk Reversal values across different time periods by rolling maturity. The risk reversal is another measure of volatility skew. I.E for 1 month it would be computed using this formula:\
\
RR (10-Delta 1M) = IV (10-Delta call 1M) – IV (10-Delta put 1M)

### **25Δ (25-Delta) Risk Reversal**

Historical 25-delta Risk Reversal values across different time periods by rolling maturity. The risk reversal is another measure of volatility skew. I.E for 1 month it would be computed using this formula:\
\
RR (25-Delta 1M) = IV (25-Delta call 1M) – IV (25-Delta put 1M)