The core idea
Fly removes the skew direction and keeps the smile curvature.
Risk reversal asks which wing is richer. Fly asks whether the wings together are richer than the middle of the smile. That makes it useful for monitoring convexity, event premium, and wing quote quality.
Measure both wings
Use same-expiry put and call nodes, commonly 25-delta or 10-delta.
Average the wings
The wing average removes the signed skew component and focuses on curvature.
Compare with ATM
Subtract ATM implied volatility to see how rich the wings are versus the smile body.
A positive fly means the average of the two wings is above ATM. A negative fly means the average wing volatility is below ATM under the chosen convention.
Formula
Average the put and call wings, then subtract ATM volatility.
The most common volatility fly quote uses the same delta on both wings and the same expiry. This guide uses 25-delta nodes.
Worked example
If the wings average 60.5% and ATM is 56%, the fly is 4.5 vol points.
With a 65% put, a 56% call, and 56% ATM volatility, the average wing is 60.5%. The fly is 60.5% - 56.0% = 4.5 volatility points.
65.0%
56.0%
(65.0 + 56.0) / 2 = 60.5%
60.5 - 56.0 = 4.5 vol points
Dashboard usage
Flies help separate skew from curvature.
A surface can have the same risk reversal but a different fly. That distinction matters when traders are watching wing demand, event convexity, and whether an SVI fit is overreacting to sparse wing quotes.
Wing richness
Fly shows whether out-of-the-money options are expensive or cheap relative to ATM volatility.
Curvature changes
A larger fly usually means the smile has more curvature, even if risk reversal is unchanged.
Term structure
Fly by expiry helps separate short-dated event convexity from longer-dated surface shape.
Fit quality
Unexpected fly jumps can point to real convexity demand, stale wing quotes, or model instability.
FAQ
Common questions about flies.
What is a volatility fly?
A volatility fly is the average of same-delta put and call implied volatility minus ATM implied volatility. It measures wing richness or smile curvature.
Is this the same as an options butterfly trade?
It is related but not identical. This page focuses on the volatility quote or risk metric, not the payoff diagram of a listed options butterfly.
Can fly be negative?
Yes. A negative fly means the average wing volatility is below ATM volatility under the chosen quote convention.
How is fly different from risk reversal?
Risk reversal measures signed skew between call and put wings. Fly averages both wings first, so it measures curvature around ATM.
References