How VIX Futures Can Have Settlement Prices Without Trading
Summary
The document explains why a VIX futures contract can show a positive settlement price even when its reported volume and open interest are zero. It distinguishes a settlement price from evidence of an executed trade: an exchange can determine a daily mark from market quotes or a theoretical pricing method.
For the VIX contract discussed, the answers describe CFE settlement as based on the average of the final bid and offer at the close. The example shows that this process can produce a settlement value when no contracts traded. The explanation is specific to the exchange's settlement procedure; it does not establish that every futures market uses the same method. Traders interpreting historical data should therefore check the relevant exchange's rules before treating settlement prices as transaction prices.
Key ideas
- A settlement price can be published even when a contract has no trading volume or open interest.
- CFE's stated VIX futures procedure uses the closing bid and offer to calculate settlement.
- Settlement prices may reflect quotes or a model rather than an executed trade.
- Settlement conventions differ, so data users should consult the rules for the relevant contract and exchange.
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Full text
# VIX Futures data: why happen to have settle price > 0 and Volume = O.I. = 0 # VIX Futures data: why happen to have settle price > 0 and Volume = O.I. = 0 This question is about something observed hands on data that makes me a little confused. Consider the term structure of futures on VIX of Monday, December 27, 2010. You can find it at the CFE market statistics webpage. This day is the first day in which the recently issued contract Q (Aug 11) - introduced on Tuesday, December 07, 2010 - began being priced, with settle price: 26.4 US$; but at the same time, closing day Volumes and Open Interests still are null... This makes me a bit confused. Is it completely normal? I guess so, but don't know why. Thanks to anybody that may clarify me on this point. ## Answer by Eli (score 3, accepted) https://quant.stackexchange.com/a/16828 The settlement price is provided by the exchange, it doesn't contradict with the fact that the contract wasn't traded. It's a theoretical price calculated by the appropriate models. In many cases, especially outside of US where there is no continuous market making, the exchange will provide a settlement price for a futures or options contracts in the end of the day. ## Answer by onlyvix.blogspot.com (score 4) https://quant.stackexchange.com/a/16848 CFE calculates settlement price from quotes whether there was trading or not. "The daily settlement price for each VIX futures contract will be the average of the final bid and final offer for the VIX futures contract at the close of trading." CFE rule 1202(p) http://cfe.cboe.com/publish/cferulebook/cferulebook.pdf
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