Concept
SKEW Index
SKEW Index is a Breadth, Sentiment & External Data concept. A reference entry: the Library explains it rather than implements it.
What is the SKEW Index?
The Cboe SKEW Index measures how steeply the S&P 500 options market prices tail risk over roughly the next 30 days. Computed from out-of-the-money SPX option prices, it captures risk-neutral skewness: how much more expensive downside puts are than equivalent upside calls. Media coverage sometimes calls it the 'black swan index'.
The scale is anchored at 100, the reading you would see if options implied a textbook bell curve of returns with no extra weight in the crash tail. Higher readings mean a fatter left tail is being priced. Cboe's history for the index reaches back to 1990, and readings have mostly ranged between roughly 100 and 150, though the top of that band has been tested more often in recent years.
SKEW rises when investors bid for crash protection, which often happens in calm markets where hedges are cheap to carry. That is why a high SKEW alongside a low VIX is a familiar pairing in calm, rising markets: near-term volatility is cheap while tail insurance is dear. Studies generally find SKEW weak as a crash timer; it prices tails rather than predicting them.
Why there's no indicator for this
SKEW is built from a strip of out-of-the-money SPX option quotes across strikes, the same species of chain data behind the VIX, run through an index methodology that Cboe defines, calculates, and disseminates. The S&P 500's own price and volume contain no trace of what OTM puts cost relative to calls, so no chart-computed study can reproduce it. A platform showing SKEW is carrying Cboe's feed, not calculating an indicator.
Price-only substitutes, such as realized return skewness, look backward at the distribution that already occurred. The content of SKEW is the forward premium hedgers are paying today, and that exists only in option prices.
How to read the SKEW Index
SKEW is a published index; the skill is scaling it and pairing it correctly.
- 1Anchor on the baseline: 100 means minimal tail premium, and points above it reflect steeper downside skew.
- 2Judge levels against the index's own multi-year range, since the typical band has drifted higher in some eras.
- 3Pair it with the VIX: SKEW rising while the VIX sleeps means tail hedging without near-term fear, a different regime from both spiking.
- 4Favor persistence over single prints; the index is noisy day to day, and sustained elevation says more than one spike.
How traders use it
- By portfolio managers gauging whether tail hedges are expensive or cheap before buying protection.
- As regime context next to the general level of implied volatility: expensive tails with cheap at-the-money vol sketches a complacent but hedged market.
- As a contrarian sentiment input alongside composites like the Fear & Greed Index, on the logic that extreme hedging demand marks crowded caution.
- Cross-checked with internals such as new highs minus new lows, since a rising tail premium is more serious when breadth is already thinning.
SKEW Index vs neighboring gauges
VIX: The VIX prices the width of the 30-day distribution; SKEW prices its tilt. Reading level and tilt together beats either alone.
Implied Volatility: Implied volatility is the raw material; SKEW is one standardized summary of how S&P 500 IV varies across strikes.
Fear & Greed Index: Fear & Greed blends many sentiment inputs into a composite; SKEW is a single, purely options-derived read on tail-risk pricing.
Related concepts · Options-derived
Concept family
Breadth, Sentiment & External Data
63 concepts mapped · 61 in the Library
SKEW Index FAQ
What counts as a high SKEW Index reading?
High is relative to the index's recent years, not a fixed number; readings pressing the top of its multi-year range signal unusually expensive downside protection.
Is the SKEW Index a good crash predictor?
Published research generally finds little timing value. It measures the price of tail insurance, and expensive insurance does not schedule the fire.
What is the difference between SKEW and the VIX?
The VIX summarizes the overall level of 30-day implied volatility; SKEW measures its asymmetry, the extra premium in OTM puts versus calls. They can move independently.
Why is SKEW sometimes highest in calm markets?
A calm tape makes hedges cheap to carry and leaves investors with gains worth protecting, so demand for tail puts can peak exactly when the VIX is low.
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