CBOE SKEW Index – Highest Levels in 2014 Show Demand for Downside Protection with SPX Puts

In 2014 the CBOE SKEW Index (ticker: SKEW) is poised to set an all-time record for its highest average daily closing value in a year, as its average daily closing value is 129.7 in 2014 (through December 29).

The previous high average daily closing value for SKEW in a year was 122.5 in 2011.  skew 12 14



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. The value of SKEW increases with the expected tail risk of S&P 500 returns. If there were no tail risk expectations and concerns, SKEW would be close to 100.


Some observers recently have asked if the CBOE Volatility Index® (VIX®) has been somewhat low in 2014 considering the level of worldwide geopolitical uncertainties and nervousness. During the years 1990 through 2013, the average daily closing values were 20.2 for VIX and 117.2 for SKEW.  So while the VIX recently has been below its long-term average, it is worth noting that the historic volatility of the SPX usually has been even lower than the VIX, and in 2014 the SKEW Index has been about 13 points above its long-term average. So in 2014 one might infer that the demand for out-of-the-money SPX puts (and disaster insurance) probably has increased relative to demand for at-the-money SPX options.

It is interesting to note that expected volatility for small-cap stocks (as represented by the CBOE Russell 2000 Volatility Index (RVX)) usually has been higher than that of large-cap stocks (as represented by the VIX Index).


Futures and options now are available on the VIX, RVX, and other volatility indexes, and the SKEW Index can be helpful to those who are investing in SPX options. To learn more about the SKEW, VIX, RVX, and dozens of other volatility-related indexes, please visit www.cboe.com/volatility.

  • guest1010101

    is this a coincidence or was it the cause?

    on 6 Oct 2014 the day of the change in VIX going to weekly SPX options for calculations the one year 20 day EMA went positive and SVXY went down to a low of 50 and never went above 75 since, where prior to 6 Oct it was at 90?