RiskDex®
A VITAL MEASURE OF THE RELATIONSHIP BETWEEN OUT-OF-THE-MONEY PUT PRICES AND OUT-OF-THE-MONEY CALL PRICES.
The Nations® RiskDex® Index measures the relationship between Nations PutDex® and Nations CallDex®.
RiskDex is the first and only measure of the vital relationship between out-of-the-money put prices and out-of-the-money call prices. As such, it is a measure of expectations for movement in the price of the underlying stock or ETF as well as a general measure of expectations for market direction during the next 30 days.
Interpreting the Value of RiskDex
The value of RiskDex increases as the normalized price of the 1 standard deviation out-of-the-money put option with 30 days to expiration increases relative to the 1 standard deviation out-of-the-money call option with 30 days to expiration. Higher put option prices relative to call option prices indicate expectations for greater volatility during the next 30 days and a potential downside bias from speculators and traders.
The value of RiskDex falls as call prices rise relative to put prices. That makes RiskDex not just a measure of option skew but of directional bias among investors.
How Is RiskDex Constructed?
The Nations RiskDex Index measures the ratio of our PutDex index value to our CallDex index value.
RiskDex focuses on the important relationship between out-of-the-money call options (CallDex) and out-of-the-money put options (PutDex).
PutDex and CallDex diverge on a close-to-close basis more often than most investors and traders realize. From January 2005 to July 2025, CallDex and PutDex diverged on 42.2% of all trading days. Just because you know what VIX is doing doesn’t mean you know what implied volatility is doing. RiskDex solves that problem and provides insight into the market’s expectations regarding direction.
In summary:
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- PutDex index value divided by CallDex index value;
- Measure of both option skew and directional bias among investors and traders;
- Creates the most intuitive measure of option skew.
RiskDex Basics
PutDex measures the normalized price of a 1 standard deviation out-of-the-money put option with a constant 30-days to expiration. CallDex measures the normalized price of a 1 standard deviation out-of-the-money call option with a constant 30 days to expiration.
RiskDex measures the ratio of PutDex to CallDex so it is a measure of both option skew and the market’s expectations for direction.
Option skew is the tendency for different strike prices in the same expiry to display different implied volatilities. It is an illogical stopgap that accounts for invalid assumptions inherent in all option pricing models. These assumptions include continuous trading while we know markets display jumps and gaps.
Skew is an important element in modern option markets and the most successful traders account for skew and put it to work for them.
If RiskDex is greater than 1.00 then PutDex is higher than CallDex and the underlying market is displaying put skew. Put skew is constant in equity index markets and very common for individual stocks.
If RiskDex is less than 1.00 then PutDex is less than CallDex and the underlying market is displaying call skew. Call skew is much rarer than put skew but it sometimes appears in assets which tend to gap upward. That includes treasury notes and bonds, precious metals, and crude oil.
Many useful option strategies pair long and short positions in calls and puts. For example, collars and risk reversals both use a long and short position in each type of option (a collar is long a protective put and the position is financed by the sale of a covered call while a risk reversal is long a call option and the position is financed by a short position in a cash-secured put). But we should have some gauge that can help us understand if put options are historically expensive of cheap compared to call options.
That’s where RiskDex comes in. It provides a consistent, objective measure of the relationship between out-of-the-money put prices and out-of-the-money call prices.
Historical Results
How To Use RiskDex
Because RiskDex compares the normalized price of out-of-the-money call and put options, it can help traders and investors make more informed decisions, manage risk, and identify potential opportunities.
It is the focus that sets RiskDex apart from volatility measures like VIX that amalgamate all options listed. It is also the only measure that compares one portion of the option skew to another allowing for insight into relative value trades.
Key Ways to Use RiskDex in Trading
Market Sentiment Gauge
RiskDex provides intuitive insight into overall market sentiment. As you can see in the historical graph above, RiskDex reacts to general changes in volatility; Equity market RiskDex will rally when fear and uncertainty increase because traders will reach to buy options to get “long volatility” or to generate downside protection. When RiskDex is high there is a substantial amount of fear. Equity market RiskDex will fall when fear is ebbing as traders and investors decline to buy put options and reach to buy all options to get bullish exposure. When RiskDex is low there is little fear and substantial complacency.
It is easy to believe that if a volatility measure like VIX is higher on the day then all options must be displaying higher implied volatilities but that’s not true. In the S&P 500, PutDex and CallDex diverge on a close-to-close basis on 42.2% of all trading days so it is important to watch RiskDex.
Here you can see important metrics regarding the history of S&P RiskDex although we calculate RiskDex on a wide variety of assets and each will have its own, often very different history (subscribers can access this data, updated on a daily basis, here.
As a sentiment gauge, we would consider RiskDex to be high when it’s above the 75th percentile. We would consider it to be very high when it is above the 90th percentile. If VolDex is also very high then sentiment is poor and the market is worried about direction. Traders are likely bidding up out-of-the-money put options in order to get long volatility and build downside protection.
We would consider RiskDex to be low if it is below its 25th percentile value, and we would consider it to be very low if it is below its 10th percentile level..
When coupled with VolDex, RiskDex can provide more nuanced insight into market sentiment. If VolDex is at an historically moderate level but RiskDex is at a level that is relatively higher, there is an opportunity to sell puts and buy calls. This would be a bullish trade and some traders will execute the trade on a “delta neutral” basis to turn it from a directional trade to a volatility trade.
These metrics are updated daily and those values are available to subscribers.
Timing Option Market Entries and Exits
Since RiskDex measures fear, complacency, skew, and expectations for direction, it can be a wonderful indicator. Below you can see the subsequent 21 trading day return for the S&P 500 index when RiskDex trades are certain levels.
RISKDEX CAN HELP TRADERS AND INVESTORS DO ALL OF THIS MORE EFFECTIVELY
Timing Underlying Market Entries and Exits
RiskDex offer unique insight into the thinking of traders. Because of this it can help in timing underlying market entries and exits.
For example, in the S&P 500 (the underlying asset for all our S&P 500 indexes is SPY, the S&P 500 ETF), RiskDex can help time market entry and exit and guide many different strategies.
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