An Introduction to The CBOE S&P 500 PutWrite Index - CBOE.com

The Index Option Put Skew• Portfolio insurance buyers often utilize out-of-the-money, rather than atthe-moneyS&P 500 Index puts.• The distance between the strike price of the put and the current indexvalue can be compared to a deductible in an insurance policy.• The higher the deductible, i.e. the farther OTM the put, the lower thepremium.• Institutional investors’ voracious appetite for index protection causesOTM S&P 500 Index puts to be valued significantly higher thancomparably OTM calls. This causes a Skew in option pricing.• The overpricing is carried up through the entire option chain, causing allS&P 500 Index options to be overpriced relative to the realizedmovements of the underlying index.3