Spx Otm puts vs otm callsThere's a disparity and an underlying bullish accumulation towards otm puts vs calls. Spread wise you can see call premium vs put premium making more sense to sell upside calls vs downside put spreads.this could be a reflection of earnings but could lead to a outsized distribution. Ie a volatility spike
SKEW trade ideas
Spx skew reflectionsSkew is the difference in spx iv of equal Delta. like call Delta 30 iv minus put Delta 30 iv. It shows how the oi chain is balanced and underlying psychology. Current rating of 132 I would deem caution. One of the things I look for when playing bearish is a rising skew but falling vvix. Rising skew= odds of an outstated move increase. Falling vvix premium of premium is falling/getting cheaper
where dat VIX at?skew (demand for otm puts in spx) has been slumbering, lingering in the background, but growing. from hitting its all time high prior to december meltdown. we're beginning to see the slumbering giant grow meaning the downside weight of spx puts is growing (can see in OI chain). from a vix point of view we may be in contango (futures curve) but we've learned the tail can overpower the dog. with skew growing and VVIX nearing a reflexive low. wide strangle (either benefit from delta change or volatility expansion) may be an optimal vix strategy. ignore the oscillators this is primarily a leading indicator that updates once daily
Fear of Crises Highest Levels Since at Least 1990The SKEW Index is a measure of tail risk - volatility measured from unexpected moves that fall outside 2 standard deviations. It has been erratic as of late, and day-to-day changes are likely more a liquidity reaction.
Much more important is the general trend of the indicator. The 20-day (1 month), 50-day, 100-day average for the risk metric is just off its highest level on records going back to 1990. In other words, the market ranks are very concerned about the future.
Black Swan Risk Canary, CBOE Skew Index
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. 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.
CBOE SKEW vs VIX divergence The pro's (SKEW) vs Joe six pack (VIX)......... CBOE SKEW Index values, which are calculated from weighted strips of out-of-the-money S&P 500 options, rise to higher levels as investors become more fearful of a “black swan” event — an unexpected event of large magnitude and consequence.
