CBOE Skew Index

The implied skew index provides a point of reference for the S&P500 implied volatility smile.

Ever wonder if the far out-of-the-money (OTM) puts are relatively cheap or expensive with respect to at-the-money (ATM) options? Or how accurate it is at forecasting actual skewness of future SPX returns? Historical Skew Index Data is now freely available to answer these questions.

Here is a glimpse of the implied skew along with Realized Skew of SPX returns since 2001.

Excel data analysis 7.0 Realized Vol Smile

Here we look at estimating the volatility smile (AKA Vol Skew) off realized vol. This gives the trader a point of reference while initiating a trade based on the current implied vol smile.

Data

Underlying: NDX (Nasdaq100 Index)
I am using the end of day adjusted values from Yahoo Finance.

On deriving realized vol, see this earlier post (Excel Data Analysis 3.0)

Moving Realized Vol Smile

For this example I've used the last 6 months of realized vol against NDX values in a Scatter Plot.
X- Axis: NDX values
Y- Axis: 20-day Realized Volatility

Quadratic Regression gave the best fit/model, having the highest R-squared at 0.53

There it is.

On running a Quadratic Regression in Excel