SKEW Index

The SKEW index measures what's called "tail risk"...essentially, the chances that something bonkers will happen in the stock market.

In statistical terms, tail risk tracks the likelihood that the market will experience outlier returns two or more standard deviations below the mean. Fundamentally, investors look at the SKEW to gauge the chances that a market crash could happen.

The SKEW index fits into the same family as the VIX index. The VIX measures volatility in the market. SKEW measures the chances for outlier results. The SKEW index is derived from prices of out-of-the-money options for the S&P 500. Thus, its main ingredient is market sentiment. It quantifies a kind of spidey sense that something strange is about to happen, as evidenced by unusual pricing for options with strike prices that are out-of-the-money.

A measure of 100 for the SKEW means there is very little chance that something weird will happen. As the index rises above 100, the chances for sudden moves become more likely.