Which type of options is noted for exhibiting more of a volatility smile?

The phenomenon of the volatility smile is often conveyed through the behavior of options, particularly in relation to their strike prices and expiration dates. Long-dated options, which are options with longer maturities, tend to show a pronounced volatility smile due to the extended time frame for underlying assets to exhibit price movement. This longer duration increases uncertainty and the potential for larger price swings, leading traders to price the implied volatility differently across varying strike prices.

In contrast, short-dated options typically do not exhibit as pronounced a volatility smile. Since these options have less time until expiration, the uncertainty surrounding the underlying asset's price movement is lower, and thus, their implied volatility tends to be more stable and less sensitive to changes in strike prices.

The at-the-money options often reflect the prevailing volatility of the underlying asset most accurately, while out-of-the-money options can also exhibit skewness but do not necessarily contribute to a pronounced volatility smile to the same extent. Given this context, the nature of long-dated options aligns with the observed characteristics of a volatility smile, making them more relevant when discussing this phenomenon in the context of options pricing.