QuantitativeExhaustion

Black Swan Risk Canary, CBOE Skew Index

INDEX:SKEW   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.
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As you can see overbought/oversold conditions using a simple indicator such as RSI.
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Quandl:CBOE/Skew

For further studies, Data goes all the way back to 1990.
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Comparing S&P 500 with Skew and VIX
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QuantitativeExhaustion PRO QuantitativeExhaustion
2 years ago
VIX vs Skew Divergence is a powerful tool.
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WallStScalper PRO QuantitativeExhaustion
2 years ago
It does appear that way indeed!
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QuantitativeExhaustion PRO WallStScalper
2 years ago
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Vix/Skew vs SPX
Confirms price / index(s) divergence is a strong correlation
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Thx! JR This is what I look for when trying to under that part of the game ! THX!
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QuantitativeExhaustion PRO WallStScalper
2 years ago
Thanks. I'm always hunting for that edge. Skew Index helps
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Comparing all three; SPX, Skew, and VIX with RSI.

From what I've sen thus far, Skew does a much better job at locating "black swan" conditions. VIX and Skew together are much better at finding the "white knight" bottoms.
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Look how the gaps and candlestick patterns are much more pronounced when comparing Skew/Vix vs SPX
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WallStScalper PRO QuantitativeExhaustion
2 years ago
How du U interpreted the chat with Skew and Vix making patterns all over the place ? (Last grey box?)
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WallStScalper PRO WallStScalper
2 years ago
Chart*
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WallStScalper PRO WallStScalper
2 years ago
A signal of market being indecisive?
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QuantitativeExhaustion PRO WallStScalper
2 years ago
Looks similar to end of June, but even much more uncertainty. If we see something gap up or green above previous candle high, I'd say stick trend higher. If opposite then we have a top and a reversal is on it's way.
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WallStScalper PRO QuantitativeExhaustion
2 years ago
Yes I agree! It seems like skew and vix together are more volatile at top of a runs than at the bottom....
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QuantitativeExhaustion PRO WallStScalper
2 years ago
That makes sense.
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WallStScalper PRO QuantitativeExhaustion
2 years ago
But what a great tool U've found ;).... another piece of the puzzle definitely giving .....an edge. Thx!
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QuantitativeExhaustion PRO WallStScalper
2 years ago
Sure is, I'm going to use it. Thanks for the comments, made me think outside the box and create this comparison.
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WallStScalper PRO QuantitativeExhaustion
2 years ago
2 tools I miss here at Tv though are the bullish percentage on SP - the BPSPX and also the NYMO end of day. I can only find them on Stockcharts.com Would be great to have it all together here.
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QuantitativeExhaustion PRO WallStScalper
2 years ago
Did you mention them in TradingView's Satisfaction suggestions
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WallStScalper PRO QuantitativeExhaustion
2 years ago
No I haven't. Thx for reminding me of it... I'll do it straight away.
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SKEW/VIX at the bottom of range, rally soon.
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