Question: The implied volatility obtained by the Black-Scholes model should be a horizontal line across all strike prices. In reality, however, it looks like a smirk,

The implied volatility obtained by the Black-Scholes model should be a horizontal line across all strike prices. In reality, however, it looks like a smirk, with ITM options having higher implied volatility and OTM options having lower implied volatilities (up to certain trading volumes and open interest). What can you say about the demand/supply dynamic for ITM v.s OTM options?

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