Settlement Process

Settlement Process

The underlying instrument that determines the cash settlement value of a VIX® option at expiration is the VIX index. At expiration, the holder of an in-the-money VIX option will receive a cash payment based on the amount the option is in the money. Consider these two brief examples:

Example 1: Settlement at expiration of a VIX Call:

    Oct VIX 20 Call
    October VIX Settlement = 22.10

    Call Settlement = $100 x (VIX Settlement - Call Strike Price)

    $210 = $100 x (22.10 - 20.00)

    Long Option Holder Receives $210
    Short Option Holder Pays $210


Example 2: Settlement at expiration of a VIX® Put:

    Long 1 Oct VIX 25 Put
    October VIX Settlement = 22.10

    Put Settlement = $100 x (VIX Settlement - Put Strike Price)

    $290 = $100 x (25.00 - 22.10)

    Long Option Holder Receives $290
    Short Option Holder Pays $290