How VIX Derivatives Settle Through the Special Opening Quotation

Summary

The document asks when VIX futures and options expire relative to settlement and describes the settlement calculation. The cited answer says both contracts use a final settlement value based on a Special Opening Quotation of the VIX Index. That quotation is calculated from opening prices of constituent SPX or SPX Weekly options expiring 30 days after the relevant VIX derivatives expiration date. If an option has no opening trade, its opening price is taken as the average of its bid and ask.

The question arises in the context of a paper alleging possible manipulation around the settlement auction, where deep out-of-the-money option prices may affect the calculation. The excerpt clarifies the pricing inputs and the role of opening prices, but it does not directly state whether the derivatives expire the day before settlement or on the same day. It also offers no independent examination of manipulation claims or of current exchange procedures, so those details should be checked against applicable contract specifications.

Key ideas

• VIX futures and options use a Special Opening Quotation as their final settlement value.
• The quotation is calculated from opening prices of eligible SPX options expiring 30 days after the VIX derivatives expiration.
• When an eligible option has no opening trade, its opening price is the midpoint of its bid and ask.
• The excerpt does not directly settle the question of the exact expiration date relative to settlement.
• The discussion raises possible auction manipulation but does not assess the claim.

Tags

# Settlement of VIX derivatives


# Settlement of VIX derivatives












Currently reading the paper of John M. Griffin and Amin Shams "Manipulation in the VIX?".

My questions has to do with settlement of VIX derivatives (options and futures on VIX). The paper states that the settlement takes place monthly when contracts reach maturity date. This is the time horizon where manipulation could happen because there is an auction in the opening between 7:45 and 8:15 (now 8:20). In this interval traders could increase volume for deep OTM options buy offering bid-prices.

So, what I have not cleared is the mechanism of the settlement. Do the options and futures on VIX expire on the previous day before settlement or it is the same day?

## Answer by AlRacoon (score 2)

https://quant.stackexchange.com/a/38634

From the CBOE website:

https://cfe.cboe.com/cfe-products/vx-cboe-volatility-index-vix-futures/settlement-information-for-vix-derivatives

Calculating Settlement Values for VIX Derivatives VIX options and futures are based on the Cboe Volatility Index, a measure of 30-day expected volatility of the S&P 500 Index. The final settlement value for VIX futures and options is a Special Opening Quotation (SOQ) of the VIX Index calculated using opening prices of constituent SPX or SPX Weekly options that expire 30 days after the relevant VIX expiration date. For example, the final settlement value for VIX derivatives expiring on January 21, 2016 will be calculated using SPX options that expire 30 days later on February 20, 2016. If there is no opening trade, the opening price is the average of an option's bid and ask price determined at the open.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.