„On Monday of last week, the SKEW hit a new record high of 148.92. At that level the market was suggesting a roughly 15% chance of a two or more standard deviation move lower in the S&P in the next 30 days. The SKEW hit another record high above 151 on Thursday of last week. It has since moved a bit lower but is still elevated.
The CBOE notes that until recently the SKEW’s all-time high was 146.88 in October 1998, during the Russian financial crisis, and the month when the Federal Reserve surprised many with an interest rate cut. The value of the SKEW was also high in June 1990, immediately before the July 1990 recession, and in March 2006 – a period of heightened concern about a possible bursting of the housing market bubble.
In short, when the SKEW is near 100, the perception is that there is very little risk of a wildly negative surprise (or surprises). On the other hand, when the SKEW is high, the perception is that there is high risk of a major negative surprise in the next 30 days – one that could send the S&P 500 Index down very sharply, very fast.“