The skew indicator—which compares the cost of out-of-the-money puts with at-the-money options—hit its lowest level since April 2025 on August 4.

In other words: the market has practically stopped paying for insurance.

After months of buying protection, investors have shifted to calls, betting on the rally continuing rather than hedging against it.

A compressed skew doesn't signal an impending drop.

But it does mean that if a decline does occur, there is little hedging in place to cushion the blow, and protection becomes extremely expensive just when everyone wants to buy it.

Hedging has become cheap...