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The spread between SKEW and $VIX is widening, indicating a potential rise in volatility. Short vol traders are facing losses due to a sharp increase in the skew of index options. This shift in skew is leading to increased market fear and the potential for larger drawdowns.
Seeing the same here in $SPX skew, with it back on the rise of late. Certainly not dropping. So I have a similar read as my friend @VolSignals on Nomura's note. One needs only look at a chart to see what's happening. 👇 https://t.co/ah63vW4FEN
"From extreme Flat Skew to now, sharply Steeper Skew = potential for larger drawdowns and “Crashier” Index moves to the Downside, after what’s been 1.5 years of “Crash-Up” only..." @Nomura #McE
...fwiw this is not the takeaway from the Nomura notes- @unusual_whales has it backwards🤷♂️ SKEW exploded in April & retreated in May BUT IS CLIMBING AGAIN ..demand for Puts over Calls reflects *increasing* levels of fear in markets "crash risk" is making a comeback... 👀 https://t.co/Zw7b4B5JUj https://t.co/qzcQqLXBSU