Generalizing the implied volatility skew into parameters is a good way to get an overall view of the surface. Comparing the parameters to history, to related stocks or to ETFs is a good way to see what part of the skew might be overpriced. For example, if the slope is steep and other stocks or ETFs are not, the put IV might be overpriced relative to calls.

To drill down to the specific areas on the implied volatility skew, the use of delta buckets to categorize implied volatility can be helpful. ORATS breaks down each expiration into 21 volatility buckets from 100 delta to 0 delta every 5 deltas.

Here's a picture of XLK from 5/22/19 delta bucktest of IVs:

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We call this our Monies (short for money-ness) part of the Data API. Trial

Monies are available each trading day back to 2007.

Tracking areas of the volatility surface using delta buckets can help identify areas of over or undervalued parts of the skew.

More reading:

How to Set Up a Pairs Trading Backtest

Term Structure of Implied Volatility

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