CBOE VOLATILITY INDEX® (VIX®) OPTIONS
The CBOE Volatility Index - more commonly referred to as "VIX" - is an up-to-the-minute
market estimate of expected volatility that is calculated by using real-time S&P
500® Index (SPX) option bid/ask quotes. VIX uses nearby and second
nearby options with at least 8 days left to expiration and then weights them to
yield a constant, 30-day measure of the expected volatility of the S&P 500 Index.
Strike Price Intervals:
Minimum strike price intervals of not less than $1.00 are permissible, subject to
certain conditions. (See CBOE Rule 24.9, Interpretations and Policies .01 for more
complete information) Otherwise, strike price intervals shall not be less than $2.50.
Strike (Exercise) Prices:
Minimum strike price intervals of not less than $1 are permissible where the strike price is $200 or less and $5 or greater where the strike price is greater than $200.
Stated in points and fractions, one point equals $100. Minimum tick for series trading
below $3 is 0.05 ($5.00); above $3 is 0.10 ($10.00).
The Wednesday that is thirty days prior to the third Friday of the calendar month immediately following the expiring month.
Up to six contract months may be listed, provided that the time to expiration is no greater than 12 months.
European - CBOE Volatility Index options generally may be exercised only
on the Expiration Date.
Last Trading Day:
The Tuesday prior to the Expiration Date of each month.
Settlement of Option Exercise:
The exercise-settlement value for VIX options (Ticker: VRO) shall
be a Special Opening Quotation (SOQ) of VIX calculated from the sequence of opening
prices of the options used to calculate the index on the settlement date. The opening
price for any series in which there is no trade shall be the average of that option's
bid price and ask price as determined at the opening of trading. Exercise will result
in delivery of cash on the business day following expiration. The exercise-settlement
amount is equal to the difference between the exercise-settlement value and the
exercise price of the option, multiplied by $100.
Position and Exercise Limits:
No position and exercise limits are in effect. Each member (other than a market-maker)
or member organization that maintains an end of day position in excess of 100,000
contracts in VIX for its proprietary account or for the account of a customer, shall
report certain information to the Department of Market Regulation. The member must report information as to whether such position is hedged and, if so, a description of the hedge employed e.g. stock portfolio current market value, other stock index option positions, stock index futures positions, options on stock index futures; and for customer accounts, provide the account name, account number and tax ID or social security number. Thereafter, if the position is maintained at or above the reporting threshold, a subsequent report is required on Monday following expiration and when any change to the hedge results in the position being either unhedged or only partially hedged. Reductions below these thresholds do not need to be reported.
Purchases of puts or calls with 9 months or less until expiration must be paid for
in full. Writers of uncovered puts or calls must deposit / maintain 100% of the
option proceeds* plus 15% of the aggregate contract value (current index level x
$100) minus the amount by which the option is out-of-the-money, if any, subject
to a minimum for calls of option proceeds* plus 10% of the aggregate contract value
and a minimum for puts of option proceeds* plus 10% of the aggregate exercise price
amount. (*For calculating maintenance margin, use option current market value instead
of option proceeds.) Additional margin may be required pursuant to Exchange Rule
8:30 a.m. to 3:15 p.m. Central Time (Chicago time). CBOE Volatility Index options
will not open until the SPX opening rotation is completed.