How VIX Futures Can Be Settled During an SPX Options Halt

Summary

The document asks how VIX futures can keep trading when a circuit breaker halts SPX options and prevents the VIX index from being calculated, especially if the halt overlaps the March contract’s valuation date. It raises the possibility of estimating volatility from option prices even when those options cannot be traded.

The sole answer suggests that some exchange-traded derivatives use the derivative’s own observed trading prices to determine daily settlement, leaving the market to establish a fair value. It offers commodities as a general analogy, but does not explain the specific CBOE VIX futures settlement rules or establish that this approach applies to the contract in question. The response is explicitly tentative, so it does not resolve how final VIX settlement would be determined during a prolonged options halt.

Key ideas

• A halt in SPX options trading can prevent calculation of the VIX index while VIX futures remain tradable.
• Some derivatives use observed prices of the derivative itself as an input to daily settlement.
• The answer does not confirm whether that method governs VIX futures final settlement during an options halt.

Tags

# How are VIX futures being priced when the VIX itself is not being calculated because of circuit breakers


# How are VIX futures being priced when the VIX itself is not being calculated because of circuit breakers












I see that CBOE has halted trading all SPX options, which means the VIX cannot be calculated. Yet VIX futures are still trading and we are very close to the last trade date for the March contract.

I suppose traders can still price options (even though they can't trade them) and thus back out a volatility. But what if the trading halt lasts until the valuation date (18th March). How will anyone work out the final valuation?

## Answer by ThatDataGuy (score -1)

https://quant.stackexchange.com/a/54353

I'm not an expert on VIX contracts etc, but I can tell you that some exchange traded derivatives compute daily settlement prices based on observed trade prices of the derivative itself. In other words, the determination of the 'fair' price of the asset is left to the market itself, rather than some other reference. After all, many commodities function that way. For example, the price of tulips is, well, whatever people are willing to pay for tulips.

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