One name, three different ideas
Gamma skew is not a standardised term, and the first useful thing to know is that people use it for at least three distinct things. Before acting on someone else's gamma skew claim, work out which one they mean.
The asymmetry of the gamma profile. Plot gamma by strike and the curve is rarely symmetric around spot. Traders call the lopsidedness gamma skew and read it as a statement about where hedging flow concentrates.
The effect of volatility skew on computed gamma. Implied volatility varies by strike, gamma depends on implied volatility, so the gamma profile inherits the shape of the volatility curve. This one is the most consequential and the least discussed.
A loose synonym for volatility skew itself. Some writers say gamma skew when they mean only that the implied volatility curve is tilted. Nothing about gamma is involved.
It is not the Cboe SKEW Index
The most common confusion is with a real, published index that measures something else. Cboe's SKEW white paper defines it as "a global, strike-independent measure of the slope of the implied volatility curve that increases as this curve tends to steepen," and explains the scale: "SKEW increases as S becomes more negative and tail risk increases," anchored so that "When SKEW is equal to 100, the distribution of S&P 500 log-returns is normal."
SKEW is a tail-risk measure derived from option prices. Gamma skew, in any of its three senses, is a statement about hedging exposure across strikes. They answer different questions, and one is a governed benchmark while the other is a chart reading. The underlying tilt in the volatility curve, and why index puts carry the premium, is covered in our volatility skew explainer.
Why volatility skew bends the gamma profile
This is the mechanism worth internalising, because it changes numbers rather than narratives.
Black-Scholes gamma is gamma = e^(-q × T) × N'(d1) / (S × sigma × sqrt(T)), where sigma is the implied volatility of that specific contract. Volatility sits in the denominator. Raise the implied volatility on a strike and its per-contract gamma falls.
Index puts below spot carry the highest implied volatilities on the chain, which on its own suppresses downside gamma. But those same strikes carry the heaviest open interest, precisely because that is where hedging demand lives, and open interest multiplies gamma in every exposure calculation. Two effects run in opposite directions, and which one wins is an empirical question at each strike rather than a rule you can memorise.
The modelling trap
Here is the practical consequence. If a data provider computes the whole chain from a single at-the-money implied volatility, it assigns downside puts a lower sigma than they actually trade at, and therefore a higher gamma than they actually have. Deep out-of-the-money puts are where that error is largest, and they are exactly the strikes that set the put wall.
Two gamma exposure charts can disagree about the shape of the profile, and about where the walls sit, purely because one used per-strike implied volatility and the other used a flat surface. Neither is broken. Before concluding that a vendor is wrong, find out which volatility input it used. Our walkthrough of the GEX formula works through the terms; the SPX snapshot behind our free gamma page crosses Cboe settlement open interest with per-contract Schwab implied volatility across roughly 20,000 listed contracts, rather than applying one volatility to the chain.
What it can and cannot tell you
An asymmetric gamma profile describes where option gamma is concentrated. That much is computed from observable open interest and observable implied volatilities, and it is genuinely informative about where hedging behaviour changes character.
What it cannot tell you is the direction of flow, because that requires knowing who holds which side. Every reading of gamma skew as dealers will support the downside or dealers will cap the upside has silently inserted a positioning assumption on top of the arithmetic. The arithmetic is exact. The assumption is not observable, and it is the part that can be wrong.
Educational content, not financial advice. See our risk disclosure.