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The 'Black Swan Index' is on a scary flight higher

'Black Swan' index outlook

Where some investors see nothing but rolling green fields and placid summer lakes, others see black swans circling high above.

Such is the picture painted when comparing the widely followed Chicago Board Options Exchange —the market's "fear" gauge— and its sister measure, the Skew, aka the "Black Swan Index," which charts, well, lots of fear. (The black swan is a metaphor for a highly unusual occurrence and took on added significance in the market following Nassim Taleb's 2007 book, "The Black Swan.")

While the VIX is closing in on historic lows and has tumbled nearly 20 percent year-to-date meaning there is a high level of complacency among investors the Skew has surged in June, rising more than 12 percent for the month.

Taken together, the two measures reflect an interesting dichotomy among investors.

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One crowd, buying plain-vanilla VIX options, anticipates a smooth ride, while the other is not necessarily anticipating but at least bracing for not just an ordinary market disruption—say, a weak economic number or one-off geopolitical event—but something really off the wall happening and knocking the seemingly indestructible stock market for a major loop.

"It's just up like a hook for the whole month of June," said Catherine Shalen, the CBOE's director of research. "What's happening is that in spite of the fact that everybody says the VIX is low and the market is complacent, the market is not complacent in every way. This is telling us that some investors who trade in options believe that the probability for a sharp, three-standard-deviation move has increased."

The VIX measures near-term or next-term options whose price targets have not been hit—called "out of the money"—and its long-term average is around 20, as opposed to the 11 where it traded Tuesday. The Black Swan, or Skew, uses an options formula to gauge risks greater than the VIX. A reading of 100 indicates little risk of "fat tail" or highly unusual events; the index is now trading around 139 and was at 143 Friday, its second-highest level ever.

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Through the year, the Black Swan Index has shown a handful of pops, mostly during the wobbly first-quarter economy and some of the scary data points it brought. After its most recent spike on March 17, the measure stayed pretty benign, then started rising into June.

The big jump, though, came on Thursday, and it would be hard to argue a coincidence. That, of course, was the day after the most recent Federal Reserve meeting, when the central bank and Chair Janet Yellen upset some market participants not by what they did or said but rather by something they paid little mind—inflation.

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Though both the bond and equity markets broadly have stayed afloat, options traders have gotten a little jittery.

"The S&P 500 has been going up and up, Some people are doubting a little bit Janet Yellen's statement that there was no sign of inflation, that the data was noisy," Shalen said. "They don't think (a Black Swan) can happen with a huge possibility, but they're wondering. That immediately translates into demand for out-of-money puts."

It also contrasts with very little demand for day-to-day downside protection, setting up an interesting landscape ahead.

"People have given up somewhat on seeing that 10 percent correction (that many predicted) because time after time they've been proven wrong," said Andrew Wilkinson, chief market analyst at Interactive Brokers. "But it wouldn't surprise me that oversized demand for protective puts is causing Skew to shift that way."

By CNBC's Jeff Cox