Thread by @MenthorQpro

1/ This chart shows the 1-Month SKEW for $SPX — and it’s flashing a strong PUT BIAS.

Let’s break down what that means in simple terms. 🧵👇

2/ First: What is “skew”?

Skew measures the difference in demand between:

• Downside protection (puts)
• Upside speculation (calls)

When skew rises → traders are paying more for downside protection.

3/ Right now, skew is in the 95th percentile over the last 3 months.

That means:

• Put demand is higher than 95% of recent readings.
• Traders are aggressively hedging downside risk.

That’s elevated fear / caution in the options market.

4/ Notice how price (top chart) has been holding near highs. But below, skew has surged into deep PUT BIAS territory.

This is interesting because:

Price = relatively strong
Hedging demand = very strong
That’s a divergence.

5/ When skew spikes like this, it usually means:

• Institutions are buying protection
• Tail risk hedging is increasing
• Market participants expect possible volatility ahead

It doesn’t mean a crash is coming.
It means traders are preparing for one.

6/ Historically, extreme skew can lead to two different outcomes:

1. Market drops and hedges pay off
2. Market holds up, and excessive hedging unwinds (which can support price)

Both are possible.

7/ The key takeaway:

Options positioning is defensive right now, even though SPX price is elevated.

That tells us sentiment underneath the surface is cautious, not euphoric.

8/ Big picture:

Skew doesn’t predict direction.
It shows positioning and insurance demand.
Right now:

• Hedging is expensive
• Downside protection is crowded
• Market participants are bracing for volatility

Always do your own research.