The SKEW index is a measure of potential risk in financial markets. Much like the VIX index, the SKEW index can be a proxy for investor sentiment and volatility. The Skew Index measures perceived tail-risk in the S&P 500.
SKEW values generally range from 100 to 150 where the higher the rating, the higher the perceived tail risk and chance of a black swan event....
SKEW is probably a little less known in the world of volatility than for example the VIX, but essentially it is a measure of the implied volatility of OUT of the money options, as opposed to AT the money options on the market like the VIX.
I suppose it may be a better comparison to check SKEW vs the SPY, but I'm a NASDAQ guy so I wanted to have a look at this in...
The SKEW Index imho is a usefull indicator but the index does not provide you any timing on when to sell or to buy. I always look at divergence and this time the divergence is massive. So the pro's are buying protection (SKEW) while Joe 6 pack keeps buying stocks and is filled with FOMO (VIX)....Why make it difficult for yourself and do as the pro's are doing...
SKEW/VIX Indicator - OIL Volatility OVX
SKEW/VIX Index compare, is a new indicator that I built here on TradingView (you can read details how it was constructed in the related link below). When combining SKEW with VIX, we can see significant market tops/bottoms and displacement/divergence. As you can see in the chart, S&P has been in a tight upward channel...
