This is the way; this is one of the key concepts and key advantages in options trading. We take advantage of Put Skew by trading our Put Credit Spreads. Put Skew is a gauge of market sentiment and the majority of our underlyings are weighted towards fear. This means that we can get around 5X more premium selling OTM (Out-of-The-Money) SPY Puts versus equidistant Calls! Not to mention that most of our underlyings have a natural positive bias, meaning they tend to go up. In SPY, the data shows it has a ~60% chance of prices flat or up over 28 days based on historical analysis. So how is that possible you may be asking? We are getting much higher premiums and we have a stronger statistical likelihood of our positions remaining OTM? The answer is FEAR. Basically since 1987, the market has priced in a stronger Put Skew due to fear, so we take advantage of this phenomenon and collect our “stock insurance” premium.
So let’s make sure you understand Put Skew. If you have ever compared an OTM Put with an equidistant OTM call, you may have noticed something that seems strange at first: they often do not have anything close to the same price or implied volatility. Because of the normal distribution curve, you might expect options that are the same distance from the current stock price to have similar values, but the options market does not price risk that way. The difference is known as Put Skew, and understanding it helps explain one of the fundamental reasons Put Paradise focuses on Put Credit Spreads rather than treating calls and Puts as interchangeable. Put Skew reflects the market’s tendency to place a higher value on downside protection because investors generally fear sharp declines more than sharp increases. A stock can grind higher for months or years, but a negative earnings announcement, lawsuit, economic shock, geopolitical event, or sudden change in investor sentiment can send the price dramatically lower in a matter of hours or days. Institutions, hedge funds, pension funds, and other market participants have legitimate reasons to purchase downside protection, and that demand affects option prices. This is important for an options seller because the market may be willing to pay more for an OTM Put than a comparable call. Since we are building a strategy around selling premium, it’s important to understand why that premium exists.
A good way to see Put Skew in action is through the SPY example presented in the video above. With SPY trading around $689.15, a January 9, 2026 expiration showed a 0.15 Delta put at the 658 strike, roughly 31 points below the current price. That Put had an implied volatility of approximately 16.33% and a mid-price around $2.57. If the options market behaved according to a simplified model in which implied volatility was identical across strikes, an equally distant 720 call might have been expected to have similar characteristics. But it didn’t. The 720 call had a lower Delta, lower implied volatility, and a much lower mid-price of approximately $0.49. The difference in implied volatility across those equidistant strikes is what we mean by Put Skew, and shows the 5X advantage in selling SPY Puts. The practical takeaway is not that every Put will always produce dramatically more premium than a corresponding call, nor is it that selling Puts somehow eliminates downside risk, but for 9 of our 12 underlyings, the options market frequently assigns a much higher price to downside protection because market participants are willing to pay for insurance against a large decline. That creates a potential premium advantage for us when selling OTM Puts. In the Put Path Options Trading System, we are not trying to predict whether SPY, QQQ, or another underlying will rise tomorrow. We are taking advantage of the market’s pricing of downside risk, combined with the probability of the underlying remaining above our strike, which gives us an attractive risk/reward opportunity.
The reason Put Skew exists becomes even more interesting when you look at the history of financial markets. Sharp downward moves tend to happen faster and with more intensity than the typical upward movement investors experience over long periods. The market’s memory of events such as Black Monday in 1987, the dot com bubble from 2000–2002, the 2008 financial crisis, and the COVID-19 selloff in 2020 reinforced the idea that downside risk can arrive suddenly. After experiencing those events, market participants have a strong incentive to pay for protection against the next one. That demand becomes embedded in option pricing as demand for buying Puts increased. This is why Put Skew can be thought of as a fear premium. The market isn’t necessarily predicting that a crash is about to happen; it is pricing the possibility that one could happen. Put Skew does not mean stocks are guaranteed to rise, and it certainly does not mean selling Puts is risk-free. In fact, the very reason Puts carry attractive premiums is because they are exposed to the risk that investors are willing to pay to transfer. The Put Path approach therefore combines the premium opportunity with probability and risk management. We generally sell OTM Puts around the 15 Delta, targeting an approximately 85% probability of profit, and use defined-risk Put Credit Spreads rather than naked Puts (or Cash Secured Puts). We also use the 200% stop loss trigger closing rule so that a trade that moves significantly against us does not remain open simply because we hope the market will reverse. Hope is not a strategy. Put Skew can improve the pricing opportunity, but risk management is what allows you to survive when sharp downward move actually materializes.
Put Skew also helps explain why diversification across different underlyings is an important part of the Put Path system. The skew profile isn’t identical across every asset. The stock-based ETFs we trade, including QQQ, IWM, SPY, DIA, SMH, and XBI, all exhibit a more consistent Put Skew profile. Some of the non-stock based underlyings behave differently. GLD and IBIT can exhibit call skew, while VIX has an especially pronounced call skew profile because traders aggressively purchase upside VIX calls as a form of crash insurance. TLT and IYR tend to have relatively balanced skew, with some Put Skew, while USO also displays Put Skew characteristics because oil prices can fall rapidly in response to changing global supply, demand, and economic conditions. At first glance, these differences might seem like a disadvantage. Why trade Puts in an underlying where the options behave differently from SPY? But that is actually part of the reason they are included. Different assets respond to different economic forces, and their option markets can therefore behave differently as well. We use them as a hedge. Our goal is to create a diversified collection of opportunities where the underlying assets and their options don’t all respond to the exact same market forces at the exact same time. That can provide a broader set of premium-selling opportunities while reducing dependence on a single underlying or a single market environment. Put Skew is therefore not just an isolated options concept; it fits into the larger architecture of how the Put Path Options Trading System selects underlyings, evaluates probability, captures premium, and manages risk.
The bigger point is that successful options trading often comes from understanding the forces that are already built into the market rather than trying to outsmart the market with another directional prediction. I ascribe to the TastyTrade philosophy that “nobody knows anything”. Don’t fight the market and definitely don’t try to outsmart the market. There are literally billions of dollars in AI computing power, analysts and algorithms on Wall Street that are smarter than me and you. Don’t try to beat these guys at their own game. Just trade what’s in front of you. Take advantage of Put Skew; it tells us something important about how investors perceive risk. The smart money traders on Wall Street are generally willing to pay more for protection against significant downside moves. As Put Path traders, we can potentially use that pricing dynamic by selling higher-priced OTM Puts while maintaining defined-risk through Put Credit Spreads. But the objective is not to collect premium simply because it looks attractive. That juicy premium exists for a reason, and the same fear that creates the opportunity can actually create substantial losses if a sharp decline occurs and the position is allowed to run unchecked. That is why the Put Path combines the premium advantage of Put Skew with approximately 85% probability-of-profit setups, diversified underlyings, 28–32 DTE, standardized spreads, disciplined position sizing, and a predefined 200% stop loss trigger. The law of large numbers only becomes useful when you consistently execute a repeatable process over a meaningful number of trades; it cannot protect a trader who abandons the rules when a position moves against them. If you want to see what this looks like outside of theory, Put Paradise gives you access to the actual trades behind the Put Path system, via the Real Time Trades and The Score, where you can see how the strategy has been applied in real market conditions. You don’t need to understand every mathematical detail behind the Black-Scholes model before you can become a disciplined options trader. But the more you understand about why options are priced the way they are, the easier it becomes to stop guessing and start trading with confidence to achieve consistent results long-term.
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