Market Expectations Of A Stock Market Crash Have Never Been Higher

Tyler Durden's picture

With VIX collapsing 10 days straight (for the first time since October 2010), one might be forgiven for thinking "everything is awesome." However, as always, the real news is in the nuance that the mainstream often misses. As VIX has plunged (complacency about 'normal' risk), Skew (which measures extreme tail risk) has exploded to its highest ever...

Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options

 Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors (institutional/professional investors are the biggest traders in SPX options).


As we explained previously,

An unusual move in the skew index (which historically oscillates approximately between a value of 100 and 150) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums.



Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usually' (it is exactly the other way around when the VIX is high and SKEW is low).

In other words, a surprising increase in realized volatility may not be too far away.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
FireBrander's picture

The "biggest investors" are those holding the sheeples money (savings/retirement)...they HAVE TO BE fully invested at all times...even if they KNEW the market was going to crash, they wouldn't call up thier customers and recommend selling...."There's never been a better time to own stocks; for the long haul!" is their motto.


FireBrander's picture
"GE to sell $30 billion specialty finance business to Wells Fargo"

WTMFBTF - Way To Mother Fucken Big To Fail - that appears to be Wells Fargo's "Downside Risk" hedge.

I know several people working as contractors for is awash with money...projects, projects projects...6 figure salaries galore...yet my sister has been waiting 3 MONTHS for the stupid fuckers to get her refinance completed! Never ending "need to fill this out" and "we can't find this, did you fill it out?"...what a circus.

tommylicious's picture

GE has been playing their hand well by selling dogshit finance businesses to idiots.  They're selling like Zell does.  Patience, Monty.  Climb the ladder.

onewayticket2's picture

the market is reacting to the proposed Biden/Deval Patrick ticket.

(and since states are implementing motor/voter for ILLEGALS, offering "free college" and helicopter money, they will win)

FireBrander's picture

I don't know who "will win", but I know who I WON'T VOTE FOR...THE CLINTONS!

..and I'm in that Demographic that tips the scales...the non-D, non-R camp...and I am not alone in thinking The Clintons are scum; one word proof of that...BERNIE!

Who is Bernie, most have no fucken clue...But HE'S NOT THE CLINTONS...which is why he's doing so well AMONG DEMOCRATS!

As it stands now, 60% of DEMOCRATS don't want The Clintons in the White House...DEMOCRATS!

20% want Bernie and 20% want a guy that ISN'T EVEN RUNNING!

ANother 20% are abstaining! That's 60% "not really wanting" The Clintons back in the WH...this election is for the Republicans to Fuckup Badly and lose...

Macchendra's picture

Bernie Sanders is about the only candidate that people who feel this way about Obama will vote for:

"No, the thing is he posed as a progressive and turned out to be counterfeit. We ended up with a Wall Street presidency, a drone presidency, a national security presidency. The torturers go free. The Wall Street executives go free. The war crimes in the Middle East, especially now in Gaza, the war criminals go free. And yet, you know, he acted as if he was both a progressive and as if he was concerned about the issues of serious injustice and inequality and it turned out that he’s just another neoliberal centrist with a smile and with a nice rhetorical flair. And that’s a very sad moment in the history of the nation because we are—we’re an empire in decline. Our culture is in increasing decay. Our school systems are in deep trouble. Our political system is dysfunctional. Our leaders are more and more bought off with legalized bribery and normalized corruption in Congress and too much of our civil life. You would think that we needed somebody—a Lincoln-like figure who could revive some democratic spirit and democratic possibility." - Cornel West

So no, it isn't because people don't know who he is.


Fahque Imuhnutjahb's picture



Now the PPT is shaking their heads saying, "Great! another damn indicator/market we've got to manage!".  "If Tyler and the rest of

the alternative media would keep their traps shut our jobs would be much easier!"  "Our mushroom method of public relations is

being destroyed!"

New_Meat's picture


"...proposed Biden/Deval Patrick ticket."

Joe Bite-Me will team up with Fauxcahauntis, the Devaluator is outta' the picture.


Money Boo Boo's picture

put this article on a loop for the next five years...........wait....a....minute....

KnuckleDragger-X's picture

GE are masters of cronyism and they knew when to bail, so I expect wonderful things to happen soon.....

curbyourrisk's picture

Largest holder of WFC?  Buffett?  He knows he will be bailed out.  ALL IN

Groundhog Day's picture

The way i observe that chart, thier will be a huge rally.  The skew chart was at lows at top of the tech bubble and housing bubble. Am I interpreting it incorrectly

Phuk u's picture

Hey Zerohedge ! Why nothing on MH17 ?

post turtle saver's picture

haha you noticed that too... they went fuckin' radio silent because a) confirmed it was taken down by a Buk, which b) confirmed what any sane person already knew, mainly that the Russian analysis of a fighter taking them out was COMPLETE AND UTTER BULLSHIT, which leads to c) the Russians being a bunch of goddamned liars with no fucking credibility to lead an impartial investigation... but then, we knew that...

BeaverCream's picture

What?  Who confirmed it?  Where does it say this beside in a headline?


Not all of the representatives endorsed the conclusion that a 9N314M warhead was involved. In its comments on our reports, the Russian Federation states that it is not possible to determine the type of warhead or the type of missile that carried this with certainty."

In an appendix to its main report, the DSB said Russia indicated that MH17 was downed by a missile that could have been fired from either the ground or an aeroplane.

The Russian manufacturer of Buk missile systems, Almaz-Antey, said its own testing and calculations also threw doubt on the DSB's report, Russia's state-run TASS news agency reported.

gherman's picture

Everybody living east of the Oder already knew that the Russians were guilty, those lying hubristic muzhiks making life suck for half of the European continent for the last 250 years ----

Oldballplayer's picture

What does Gartman think?

Groundhog Day's picture

"We're gonna climb the wall of worry", I have to be bullish at this juncture


Money Boo Boo's picture

Gartman is currently sticking his finger in a plumb, he needs a minute.....

Hype Alert's picture

It's ok, the gremlins in the market will have this green in no time.  The problem is will the gremlins be there when we finally correct?

Glass Seagull's picture



impliedcorr * skew * vix = what you should watch

flapdoodle's picture

I think stock prices have reached what looks like a permanently high plateau.


venturen's picture

Is that you Irving? type well for being 200 years old

flapdoodle's picture

Indeed it has. The FED is taking the cue from TEPCO and creating a wall of ice around the NYSE to forever excise the possibility that the stock market will melt down...

kralizec's picture

I'm so overcome with relief I cannot stop my feet from moving!

venturen's picture

people's realization of manipulation of what was formerly know as a market has never been higher

There is no market just a bunch of central banks doing the bidding of a couple mega banks

NoWayJose's picture

I prefer to think of it as the skRew index!

undercover brother's picture

Hard to believe given the constant program buying every time stocks approach the lows.

Osmium's picture

Sounds like a reason for new all time highs.

thismarketisrigged's picture




Kaaos's picture

Contrarian sign..?

aliki's picture


sounds like 1 more excuse not to raise rates (since if they do, they'll actually give pensioners, savers, bond investors something other than dividend paying stocks / REITs to extract yield out of) & they'll break the frankenstiein market they've created.

Keltner Channel Surf's picture

ALL VIX's are being absolutely crushed right now, w/ one of the bigger RUT market open ambush in months.  Is it the last cries of tired party-goers ?  ...

venturen's picture

if Hilary is will rocket....if republican is will go to zero. Cronies need scape goats. Obama has been very accomodating...and will be rewarded like Comrade Clinton. 

yogibear's picture

Expect the Fed's next move to be helicopter money.

Just outright Zimbabwe economic tactics.

Raging Debate's picture

Yogi - My opinion as well. Timed for election year when people a bit more optimistic. As the fuel gives some temporary strength to the economy I see 2016 as the last year to hedge and attempt to ensure you come out the other side with a couple pennies in your pocket.

The geopolitical risks are something so far out.of my control I just cant spend time worrying about it anymore and am hedged for three months of the three B's to help me and neighbors if the worst happens. Beyond that just Vida la Viva.  

 I expect to see things here that are true horrors, so prepping mentally and physically best I can. The good news is that I am surprised as I have gotten out there how many have some back up means now, at least those with half a mind anyways. It will be enough to rebuild but cant say I look forward to what looks to be inevtable. I hope I am wrong but as most you well know here, hope is not a strategy. 


zrussell's picture

More ZH fear mongering.


Nothing is going to crash.

Winston Churchill's picture

More sage advice from the kindergarten.

vq1's picture

ZH isnt the only "fear mongering"

MSN from just today:

Global Weath Shrinks for First time since lehman

not saying there is a crash, however *since lehman* is a common meme on ZH


You must admit there have been an increasing amount of new records, new deviations as well as "since lehman, since 2000, since 2008" events.

Id like to think most ZHers dont look at one chart and say "there is the proof." Its the sum of aggregate data that helps steer a prediction. 

tommylicious's picture

Who the fuck is buying this shit market?

Turin Turambar's picture

If I could create billions right now with a couple of keystrokes, I'd be buying everything hand over fist, too.  In the end, even after a crash, I'd have gotten something for nothing.

yogibear's picture

The central banks through their member banks.

Federal Reserve can't buy stocks directly. Fed can print and lend money at 0%. Shell game.

Just like the Fed's off-balance sheet bonds.

More extreme Fed action ahead like helicopter drops of money. Seizing of accounts by the banksters.

vq1's picture

i still contribute to my 401k and im holding my few, picked stocks. However I also keep cash in checking and started buying physical gold. 


despite what makes sense to me: my peers, friends, colleagues, advisers and family - who are all intelligent people, mind you - are not worried. So I consider "half-in, half-out" to be my strategy for now. They all think im a dumbass for buying gold. 

aardvarkk's picture

You ARE a dumbass for buying gold.  Until everything goes to shit.  Then you're a genius.  There's just no way to know when everything goes to shit.  At least for us doubt the market riggers will have more lead time than us to get out.

MsCreant's picture

Its time to play the music, its time to light the lights...