# Why is Implied Volatility more important than skew for put spread pricing?

It is said on page 26 of the book "Trading Volatility: Trading Volatility, Correlation, Term Structure and Skew" by Bennett (2014) that:

A rule of thumb is that the value of the OTM put sold should be approximately one-third the value of the long put (if it were significantly less, the cost saving in moving from a put to a put spread would not compensate for giving up complete protection). While selling an OTM put against a near-ATM put does benefit from selling skew (as the implied volatility of the OTM put sold is higher than the volatility of the near ATM long put bought), the effect of skew on put spread pricing is not normally that significant (far more significant is the level of implied volatility).

So basically, not only skew is needed, but it should be highly skewed? Is that what this means?

Isn't skew and IV similar in nature?

• Where do you read that it should be highly skewed? If you set the value to approximately one-third the value of the long put, both skew and IVOL level will determine what the strike will be. In my opinion, all it says it that skew is less significant than the level of IVOL. Skew is about the shape of IVOL. You can look at this answer to see the difference between level and skew (for FX, but the general idea is the same, although compared to the example, the skew for equity IVOL is usually the other way around). Sep 27, 2022 at 20:22

For argument's sake, let's take the 90/85 % put spread (long 90, short 85) with s = 100, $$\sigma_{90} = 20$$%, $$\sigma_{85} = 21$$%, $$r=0, T = 1$$. With these initial values, the put spread's value is 1.16. If we bump the overall IV curve by 10% to 30% and 31% for the 90 and 85 strikes respectively, the new value is 1.60.