Skew index warns of trouble ahead

Despite the hazardous political backdrop, global markets are “remarkably calm”, says John Dizard in the FT. Yet many “large, conservative, real-money investors” are seeking out cheap ways of hedging themselves against a market crash.

The Skew index captures the level of unease in markets: it measures the difference between the cost of buying a put option on the S&P 500 – which offers protection against a sharp fall – and a call option, which does the opposite. It ranges between 100 and 150, and it is now at 140, among the higher readings since [...]

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