As one would expect, SPX Skew (1m 25d) should be elevated with the upcoming US elections. Below we are looking at HS<go> and the SPX vs the SX5E Skew (1m 25d). The upper chart shows that overall Skew was coming off for both after Covid. (blue box) But it also shows, that Skew has been rising since end of 23 for the SPX, and end of Feb 24 for the SX5E. The chart in the middle shows that SPX Skew used to be over the SX5E up to the end of 21, and only since about July this year turned more expensive relative to the SX5E again. Correlation between the two is at its highest since end of 21 too. You can create your own Skew indices using CIX<go>
thank you Andreas Schmidt for this chart. This graph reminds us how depressed SPX skew was in 2022 (with a realised skew as depressed : spot down / vol down!). That "anomaly" was due to the huge supply of spx skew via the issuance of VKO puts in large size. Those producst had a maturity of 18 month on average, which, coincidently or not, corresponds to the period where SPX skew was so depressed !
--
1moThis is also the seasonality for implieds vols ahead of elections , hence the skew is a product of higher vol. I would take the skew in relation to ATM vol in order to sort the actual skew correctly.