SPY tail Risk Index
This index is constructed by taking the SPY and adding 3 month out of the money puts activity to come up with a "tail risk" estimate. It is a measure of the market's appetite to take on new risk. At extreme levels, it can signal over-optimism and a potential market downturn. In fact, that is what happened on 8/16/22 and 12/1/22.
It is now happening again, but the big difference between now and then is that we are "bull flagging". This suggests a possibility that this rally may not be over. Watch this index over the next few days and see if the bull flag breaks down.
If you want to have some fun, construct a chart of the ratio of SPY to PPUT3M.
It is now happening again, but the big difference between now and then is that we are "bull flagging". This suggests a possibility that this rally may not be over. Watch this index over the next few days and see if the bull flag breaks down.
If you want to have some fun, construct a chart of the ratio of SPY to PPUT3M.
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