Despite the fact that short term implied volatility has declined, longer term implied volatility has continued to hover at extreme levels. Five year implied volatility is near 30%, but the more interesting phenomenon is the spread between 90% and 110% moneyness in longer tenors. If we focus just on the 12-month S&P 500 skew, we are seeing a gap of nearly 7% in the 90/110 skew:
If we extend this chart to 2002, it almost appears that the premium on downside protection has been steadily increasing. This could mean that selling puts is incredibly attractive or the markets are setting up for the great wealth reset.