I mostly sell credit spreads on SPX that are pretty far OTM, like 5-15 delta. Wanting something more than the gaggle of VIX indexes, I stumbled upon the CBOE SKEW index. Thought it might be real time, but apparently it comes out once a day at the end of the day. Not useful for trading hours as it is backward-looking.
Also, it didn’t seem to consistently make sense. Sometimes SKEW was really high although there was a general lack of volatility and the market heading higher. For instance, SKEW on April 13th this year was very high yet VIX was relatively controlled and the market gained. A few days later the SKEW dropped a bunch. Then on the 21st, market dropped and VIX levels were very similar to the 13th, but the SKEW for that day was actually at a quite low level similar to a few days after the 13th.
If I’m interpreting things correctly, this tells us that OTM put spreads written on the 13th would have produced more premiums than they usually would have. But on the 21st we get the opposite story. The premiums relative to the risk of a dropping market and VIX measures similar to the 13th were not as good.
\-Do I have the above idea correct?
\-Also, does anybody use this measure? Seems useless if all it can tell you is that it would have been good to make trades after the fact.
\-Is there any other measure that tracks skew in real time?
\-Should I just use past experience and if I notice elevated premiums for a certain delta … then just trade more of them or go farther OTM?