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Wednesday, October 14, 2015

CBOE SKEW Index Hits All-Time High

The CBOE SKEW Index has hit an all-time high, which means the cost of protecting against a major outside event is now at a record.
The CBOE SKEW Index is an index derived from the price of S&P 500 tail risk. Similar to VIX®, the price of S&P 500 tail risk is
calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means
that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible.
As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns
become more significant. 
Credits: Simon Maierhofer