On March 20 the 10 Day Moving Average of the CBOE SKEW Index reached a historical high at 145.49. The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk. Similar to CBOE 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. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".
Showing posts with label CBOE SKEW Index. Show all posts
Showing posts with label CBOE SKEW Index. Show all posts
Wednesday, March 22, 2017
SPX vs CBOE SKEW Index (10 DMA) │ All-Time-High
On March 20 the 10 Day Moving Average of the CBOE SKEW Index reached a historical high at 145.49. The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk. Similar to CBOE 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. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".
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 |
Labels:
CBOE SKEW Index,
SPX,
US-Stocks
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