CBOE SKEW Index
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Definition
An index derived from out-of-the-money S&P 500 options that estimates the perceived risk of an outsized downside 'tail' move — the market's price of crash protection. Typically ranges roughly 100 to 150.
How to read it
Where VIX summarizes at-the-money expected volatility, SKEW captures the shape of the tail — how much more investors are paying for far out-of-the-money puts (crash insurance) relative to a lognormal baseline. A reading of 100 implies a near-normal distribution; higher readings (130-150) imply the market assigns greater-than-normal odds to a large negative surprise. SKEW is best read as a gauge of hedging demand and tail-risk perception, not as a timing tool: high SKEW says protection is in demand, not that a crash is imminent.
How practitioners use it
Used as context among multiple indicators — never as a standalone signal to act.
Less common professional uses
SKEW is a notoriously poor timing signal — elevated readings can persist for months without a crash; treat it as a conditions map, not a trigger. The more informative divergence is low VIX + high SKEW: complacency at-the-money paired with tail nervousness, a configuration that has preceded some volatility shocks. Counterintuitively, a very high SKEW means crash puts are already expensive/crowded — the marginal protection buyer is paying up, which can blunt the payoff of chasing tail hedges. Percentile-rank SKEW; because its scale drifts, raw levels are less meaningful than where the current print sits versus its own multi-year distribution.
Sources & provenance
CBOE SKEW Index methodology (educational overview); Portal desk education notes
This page is educational content published by Pachira Aquatica Global LLC. It is not investment advice and not a recommendation.