OI · PCR · VIX signalsPositionalNIFTYmedium complexity

Put skew extreme

This positional NIFTY options strategy watches the volatility skew: how much more implied volatility out-of-the-money puts carry than equivalent calls. When that gap is in the top tenth of its past readings, puts are judged unusually expensive, and the strategy sells them through a monthly put credit spread. The trade exits on a profit target, a stop, a return of the skew to normal, or a few sessions before expiry.

When NIFTY put skew is in the top tenth of its past year, sells a 25-delta monthly put and buys a 10-delta put, exiting on target, stop, skew normalising or near expiry.

Market viewBullish

TradesNIFTY monthly options, 2-leg put credit spread

RiskDefined (max loss known at entry)

CapitalHedged option-selling margin

SuitsAdvanced

Trades a month0.9

Typical hold2 days

Profitable months1 of 12

Longest losing run2 trades

Made money inNIFTY steady or rising after entry (small sample)

Lost money inNIFTY falling more than 1% after entry (small sample)

Default settings

Symbol

Scan time

Skew delta

Skew % hi

Skew % exit

Min skew days

IV min DTE

Structure

Short delta

Wing delta

Min DTE

Stop x

Target %

Exit DTE

Exit time

Lots

Backtest this strategy →Change any setting, pick your own period and run it in the Quantsapp web app. Backtesting is part of the Max plan. Pro+ members can use it now as a free trial.

How it trades

What it trades

Universe

NIFTY Positional · 1 Oct 25 → 30 Sep 26

Enters

15:15 when put skew is at or above its 90th percentile

Legs

SELL PE · 0.25 delta · Nearest monthly with 10+ days left · 1 lotBUY PE · 0.10 delta · Nearest monthly with 10+ days left · 1 lot

Exits

stop spread costs 2x the credittarget 50% of the credit earnedsignal skew percentile back to 50 or lowertime 15:15, 5 sessions before expiry

Re-entry

Next qualifying day once flat

Skew

once a day at SCAN_TIME, on the nearest expiry with at least IV_MIN_DTE calendar days left: skew = IV of the ~25-delta put - IV of the ~25-delta call, in vol points. Percentile = % of the previous LOOKBACK_DAYS readings below today's (readings start LOOKBACK_DAYS sessions BEFORE the backtest, so the gate works from the first day).

Entry

when flat and the percentile >= SKEW_PCT_HI, at SCAN_TIME, on the nearest monthly expiry with at least MIN_DTE calendar days left, LOTS each: STRUCTURE "put_spread" - sell the ~SHORT_DELTA put, buy the ~WING_DELTA put; STRUCTURE "risk_reversal" - sell the ~SHORT_DELTA put, buy the ~SHORT_DELTA call.

Stop

the sold side costs STOP_X times the credit taken (loss = (STOP_X - 1) x credit). For the risk reversal the "credit" is the sold put's premium.

Target

TP_PCT % of that credit earned, or the skew percentile is back to SKEW_PCT_EXIT or lower (checked once a day at SCAN_TIME).

Exit

at EXIT_TIME, EXIT_DTE trading sessions before the expiry.

Results

PRE-BUILT · DEFAULTS

NIFTY · 2025-10-01 → 2026-09-30 · 11 trades · before costs

Net P&L−₹31,811

Win rate45%

Max drawdown−₹40,342

Avg per trade−₹2,892

Profit factor0.45

Worst trade−₹15,268

Where it made and lost money

Eleven trades are too few for firm conclusions, but the pattern fits how a put spread works. The 7 trades during which NIFTY fell more than 1% lost ₹56,082, winning one, because the sold put gained value fast and hit the stop at twice the credit. The 4 trades during which NIFTY held within 1% or rose all won, making ₹11,453 and ₹12,818. Nine of the eleven entries came after evenings with India VIX above 14.5 and lost ₹15,246 between them: a steep skew appeared in stressed markets, which is exactly when puts stay expensive for good reason.

India VIX the evening before

VIX 11.5-14.5 (normal)−₹16,5652 trades0% won

VIX above 14.5 (nervous)−₹15,2469 trades56% won

Kind of session on the entry day

Trend day (closed near the high or low)−₹4,4102 trades50% won

Choppy day (wide range, closed mid-range)−₹27,4019 trades44% won

Market while the trade was held

NIFTY rose over 1% while held+₹12,8182 trades100% won

NIFTY within ±1% while held+₹11,4532 trades100% won

NIFTY fell over 1% while held−₹56,0827 trades14% won

How the entry day opened

Gap up of 0.4% or more−₹10,5763 trades33% won

Flat open−₹26,5754 trades25% won

Gap down of 0.4% or more+₹5,3404 trades75% won

Session direction on the entry day

NIFTY closed above its open−₹34,2298 trades38% won

NIFTY closed below its open+₹2,4183 trades67% won

Expiry day (NIFTY weekly)

Expiry day−₹15,6522 trades0% won

Other days−₹16,1599 trades56% won

Day of the week

Monday+₹3,3313 trades67% won

Tuesday−₹8,2221 trades0% won

Wednesday−₹3,8324 trades50% won

Thursday−₹13,9522 trades50% won

Friday−₹9,1361 trades0% won

The same trades, split by the market conditions around each entry, before costs.

About this strategy

Every day at 15:15, on the nearest expiry with at least 7 days left, measure skew as the IV of the roughly 25-delta put minus the IV of the 25-delta call, in volatility points.
Rank today's skew against the past year's readings; at least 40 readings are needed before the rank is used.
If the rank is at the 90th percentile or higher and no trade is open, sell the 25-delta put and buy the 10-delta put of the nearest monthly expiry with at least 10 days left.
Stop out if the spread costs twice the credit taken, so the loss equals one credit.
Take profit at 50% of the credit, or exit once the skew rank falls back to 50 or lower (checked daily at 15:15).
Otherwise close at 15:15 five trading sessions before expiry.

Why traders use it

Index puts usually carry higher implied volatility than calls because investors pay for crash protection. When that premium becomes extreme, option sellers see an overpriced insurance market and want to be the insurer. A put credit spread collects that rich premium while the bought wing caps the downside. Tying entries to a percentile of the skew's own history avoids arguing about what 'steep' means in absolute terms.

Works best whenA skew spike on fear that fades without a real fall: NIFTY steadies or rises after entry, put prices ease, and the spread reaches its 50% target; in this test every trade where NIFTY did not fall more than 1% made money.

Struggles whenThe steep skew turns out to be an accurate warning and NIFTY falls more than 1% after entry, pushing the sold put through its stop; in this test nearly all entries came in nervous, high-VIX conditions.

The year in plain words

On NIFTY from 1 Oct 2025 to 30 Sep 2026 with default settings, the skew reached its top-decile trigger in only a short spell, and all 11 trades fell in March and April 2026. Five won and six lost, for a ₹31,811 loss before costs and a profit factor of 0.45. Six trades hit the stop at twice the credit, and losses averaged ₹9,566 against ₹5,117 for wins. March alone lost ₹40,343, as the expensive puts proved justified by the market's moves. After ₹20 per order and bid-ask slippage, the loss was ₹39,051.

What the settings do

Scan timeWhen the skew is measured each day and when entries and the skew-normal exit are checked.Skew deltaThe delta of the put and call whose IVs define the skew. Lower deltas measure further out in the wings, where skew is usually steeper.Skew % hiThe skew percentile at or above which a trade opens, from 80 to 98. Lower values trade more often on less extreme readings.Skew % exitOnce the skew percentile drops to this level or lower, the trade is closed early as the mispricing has faded.Min skew daysHow many past readings are required before the percentile is trusted. Fewer readings start trading sooner but on a thinner history.IV min DTEThe minimum days to expiry for the expiry used to measure skew, avoiding the distortions of options about to expire.Structure"put_spread" sells a put and buys a further put for defined risk; "risk_reversal" sells a put and buys a call of the same delta, a bullish position with open downside.Short deltaThe delta of the sold put (and of the bought call in the risk reversal). Higher deltas collect more but sit closer to the market.Wing deltaThe delta of the bought protective put in the spread. A lower delta makes a wider, cheaper spread with a larger maximum loss.Min DTEThe minimum calendar days left on the monthly expiry at entry.Stop xThe stop as a multiple of the credit: at 2 the trade is closed when the loss equals the credit received.Target %The share of the credit to earn before taking profit.Exit DTEHow many trading sessions before expiry any open trade is closed, avoiding the final days' gamma risk.Exit timeThe time of day for the pre-expiry exit.

Risks

A steep put skew often precedes or accompanies real declines, so selling it means taking the side of the crash insurance.
Trades are held overnight and can gap through the stop level.
Signals cluster in stressed periods, so several losing trades can arrive back to back.
The risk-reversal structure has no protective wing and carries open-ended downside.
With only 11 trades, the result rests on one turbulent stretch.

Who it suits

Experienced option traders who follow implied volatility and skew, accept defined-risk losses in stressed markets, and want a rule-based way to test whether expensive puts are worth selling.

Questions traders ask

What is put skew in NIFTY options?

Put skew is the extra implied volatility that out-of-the-money puts carry compared with calls the same distance away. Here it is the 25-delta put IV minus the 25-delta call IV. A larger number means downside protection is priced more expensively than upside.

Is selling extreme put skew profitable on NIFTY?

Not in this backtest. From 1 Oct 2025 to 30 Sep 2026 it lost ₹31,811 before costs and ₹39,051 after ₹20 per order and bid-ask slippage, from 11 trades in March and April 2026. That is a small sample, and past results do not guarantee future ones.

Why use a percentile instead of a fixed skew level?

Skew levels drift over time and differ between calculation methods. Ranking today's reading against the past year asks a simpler question: is skew high compared with its own history? The 90th percentile means higher than nine in ten past readings.

What is the difference between the put spread and the risk reversal?

The put spread sells a 25-delta put and buys a 10-delta put, so the loss is capped. The risk reversal sells the put and buys a 25-delta call instead, betting on a rise and leaving the downside uncapped.

Terms used here

Volatility skew Implied volatility (IV)IV percentile / IV rank Credit spread Delta Monthly expiry OTM and ITM Stop loss (SL)Target / take profit Before costs / after taxes / after all costs

Before you rely on it

WATCH OUTA steep put skew is often right - it rises ahead of draw-downs - so selling it carries tail risk; keep it small. Vendors define skew differently, so thresholds do not transfer between them.

WHERE THE RULES WERE UNCLEAR · OUR CHOICESThe sources give no thresholds ("unusually steep" is undefined); every number is the spec's proposal. Sign convention: put IV minus call IV, so a steeper put skew is a bigger number. The skew is read on the nearest expiry with >= 7 days (a near-constant maturity) while the trade uses the monthly. Stops and targets fill at market - the trade is held overnight and can gap through a level. The spec's directional variant (long NIFTY when the skew flattens in a sell-off) is not coded here. LOCAL DATA: only the nearest two expiries are stored, so locally the monthly is tradable only in its last ~2 weeks and the warm-up starts in Dec 2025.

Also known asskew traderisk reversal nifty25 delta skew

Backtests run on historical NSE data with fills at the last traded price. "Before costs" excludes brokerage, taxes and slippage. Quantsapp is not recommending any strategy; it is just a backtesting utility. Past results are not a promise of future returns.