Black Swan Index

[Scooot]

http://www.cnbc.com/id/41516409

Investors looking for Black Swans in the stock market may be able to find them in the latest offering from the Chicago Board Options Exchange.

On Feb. 23, the CBOE plans to roll out the S&P 500 Skew Index, an options gauge that already has earned the monikers of both the Black Swan Index and, a bit more derisively, the SIX.

At its heart, the SKEW (as the CBOE prefers) will measure out-of-the-money S&P 500 options to determine the risk of unanticipated, or Black Swan, events threatening the market. The Black Swan reference, of course, is from the Nassim N. Taleb book of the same name that, in part, delineates the importance of low-probability but catastrophic events in financial markets.

The SKEW will measure the implied volatility between puts and calls and derive a numeric value from the difference between the two.

 

[koupparis]

I'm surprised this hasn't gotten any comments or publicity. I'm sure people are arguing on either side of it's merits and drawbacks.

Does anyone think it'll be as popular as the VIX?

 

[goldski]

I'm surprised this hasn't gotten any comments or publicity. I'm sure people are arguing on either side of it's merits and drawbacks.

Does anyone think it'll be as popular as the VIX?

It won't be popular at all.

 

[Andy Nguyen]

Because?

 

[HyperVolatility]

This is my 2 cents to the thread:

The Index will be extremely popular amongst fund managers, portfolio managers and options trader because OTM options are often used for hedging purposes.

Buying OTM options is effectively a way to fight agaist fattailedness risk and that is precisely why the Index has been called the Black Swan Index.

It is not a break through in the world of finance. Professionals, volatility traders and option traders already looks at OTM implied vol and monitor "suspicious changes" in its level with a certain frequency (particularly after the crises which highly increased the importance of the non-normal distribution of financial series and Sigma 3 events )

This is going to be a retailed oriented Index for individual or private investors.
I do not think it's going to be unpopular but it will take time for the average investor to understand it.

 

[goldski]

Because?

People who trade legit volume already use such measures.

The only people this will excite are individual investors.