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Measuring SPX Volatility Skew Stickiness with the SSR

Article Quant Q&A · Author: Spasski
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Summary

The document contrasts sticky-strike and sticky-delta descriptions of implied volatility surface dynamics. Under sticky strike, volatility at a fixed strike is treated as unchanged as spot moves; under sticky delta or moneyness, the skew moves with spot so volatility at a fixed relative strike or delta is treated as stable. It asks whether SPX options preserve this relationship in calm conditions and over short horizons.

The response frames the behavior as a continuum summarized by the Skew Stickiness Ratio (SSR): zero corresponds to sticky delta, one to sticky strike, and values above one to an overreaction associated with stronger spot-volatility correlation. It reports that SPX ratios are around 1.4 for short tenors and approach 1 for longer tenors, suggesting dynamics closer to sticky strike than sticky delta. These figures are asserted without a source or methodology in the excerpt, and the broad claim should not be treated as a universal rule across market regimes or measurement choices.

Key ideas

  • Sticky strike holds implied volatility fixed at a numerical strike as spot changes.
  • Sticky delta or moneyness holds volatility approximately stable at a fixed relative strike or delta.
  • The Skew Stickiness Ratio provides a scale for comparing these surface dynamics.
  • The response reports higher SSR for short SPX tenors and values nearer sticky strike for longer tenors.

Tags

OptionsVolatilityEquitiesUS markets
Full text
# SPX Volatility Surface: Sticky Moneyness vs. Constant Delta


# SPX Volatility Surface: Sticky Moneyness vs. Constant Delta












I am trying to understand how the $SPX$ implied volatility skew reacts to changes in the spot price $S$, specifically regarding options at fixed percentage offsets (e.g., 10% OTM, 20% OTM).

If $S$ moves, but we look at a strike $K$ that maintains a constant moneyness ratio (e.g. $K/S = 0.9$), does the market typically adjust the Implied Volatility at that new strike to ensure the option delta remains constant?

I understand there are two primary theoretical models for skew dynamics:

Sticky Strike:

The volatility at a fixed numerical strike $K$ remains constant, regardless of spot moves.

Sticky Delta / Sticky Moneyness:

The volatility skew "slides" with the spot price, such that the volatility at a fixed moneyness (or fixed Delta) remains constant.

My question is: Does SPX typically (calm markets) exhibit "Sticky Moneyness" behavior where the implied volatility at fixed percentage offsets ($K/S$) remains stable, effectively preserving the option delta? Or does the volatility surface deform in a way that breaks this relationship at least in the short run (intra-day or a few days).

## Answer by QuantCalc.net (score -1)

https://quant.stackexchange.com/a/85853

This is not an either-or scenario. Market behavior is typically quantified using the Skew Stickiness Ratio (SSR), where an SSR of 0 indicates sticky delta and 1 indicates sticky strike. An SSR greater than 1 signals an overreaction, driven by a strong spot-volatility correlation. For the SPX, the ratio sits around 1.4 for short tenors and approaches 1 for long tenors. Consequently, SPX dynamics lean toward sticky strike or overreaction, never sticky delta.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.