Cboe Volatility Index® (VIX® Index®) FAQs

This list of Frequently Asked Questions (FAQs) is a representation of questions commonly asked about the VIX Index and derivatives listed on the VIX Index.

The VIX Index: Basics

Product and Settlement Information

SOQ Auction Information

Other Information

Additional Information & Resources

What is the Cboe Volatility Index (VIX Index)?

The VIX Index is a financial benchmark designed to be an up-to-the-minute market estimate of expected volatility of the S&P 500 Index, and is calculated by using the midpoint of real-time S&P 500® Index (SPX) option bid/ask quotes. More specifically, the VIX Index is intended to provide an instantaneous measure of how much the market thinks the S&P 500 Index will fluctuate in the 30 days from the time of each tick of the VIX Index.

Originally posted (Apr 14 2016); updated (May 15 2018).

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How is the VIX Index calculated?

Cboe Options Exchange® (Cboe Options®) calculates the VIX Index using standard SPX options and weekly SPX options that are listed for trading on Cboe Options. Standard SPX options expire on the third Friday of each month and weekly SPX options expire on all other Fridays. Only SPX options with Friday expirations are used to calculate the VIX Index.* Only SPX options with more than 23 days and less than 37 days to the Friday SPX expiration are used to calculate the VIX Index. These SPX options are then weighted to yield a constant maturity 30-day measure of the expected volatility of the S&P 500 Index.

* Cboe Options lists SPX options that expire on days other than Fridays. Non-Friday SPX expirations are not used to calculate the VIX Index.

Intraday VIX Index values are based on snapshots of SPX option bid/ask quotes every 15 seconds and are intended to provide an indication of the fair market price of expected volatility at particular points in time. As such, these VIX Index values are often referred to as "indicative" or "spot" values. Cboe Options currently calculates VIX Index spot values between 3:15 a.m. ET and 9:15 a.m. ET (Cboe GTH session), and between 9:30 a.m. ET and 4:15 p.m. ET (Cboe RTH session) according to the VIX Index formula that is set forth in the White Paper.

The generalized formula used in the VIX Index calculation is:

Originally posted (Apr 14 2016); updated (Jun 29 2016); updated (May 15 2018); updated (Oct 8, 2019).


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What does the VIX Index measure?

The VIX Index measures the level of expected volatility of the S&P 500 Index over the next 30 days that is implied in the bid/ask quotations of SPX options. Thus, the VIX Index is a forward looking measure, in contrast to realized (or actual) volatility, which measures the variability of historical (or known) prices.

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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Can I hold the VIX Index?

Unlike the S&P 500 Index that is comprised of a relatively stable portfolio of stocks, the VIX Index is priced using a constantly changing portfolio of SPX options. In fact, in order to maintain a constant maturity of 30 days, the portfolio of SPX options comprising the VIX Index changes slightly every single minute. As such, traders cannot buy and hold a portfolio of the constituent SPX options of the VIX Index because traders would need to rebalance the portfolio continuously in order to track the VIX Index through time.

Even though the prices for Volatility Derivatives are linked to SPX options generally, the valuation of individual Volatility Derivatives expiring at various points along the term structure can and do reflect very different portfolios of SPX options.

The exact composition of the SPX option portfolio used to settle Volatility Derivatives is not known during the life of a Volatility Derivative. For example, traders do not know which SPX calls and puts will be out-of-the-money on a given future date. However, traders do know with certainty the expiration date of SPX options that will comprise the VIX Index on the expiration date of Volatility Derivatives as well as how the VIX Index formula will be applied on that date. Thus, it is possible for traders to estimate the forward price of the VIX Index, which is a key driver for VIX futures and options prices.

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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What products are listed on the VIX Index?

Cboe Futures Exchange (CFE) is the exclusive home for trading VIX futures and Cboe Options is the exclusive home for trading VIX options. Cboe Options and CFE list standard and weekly Volatility Derivatives.

The settlement value for standard Volatility Derivatives is calculated using only standard SPX options, which are A.M.-settled and expire on the third Friday of each month. The settlement value for weekly Volatility Derivatives is calculated using only weekly SPX options, which are P.M.-settled and expire on all other Fridays.*

* Cboe Options lists SPX options that expire on days other than Fridays. Non-Friday SPX expirations are not used to calculate the settlement values for Volatility Derivatives.

Expiration
Volatility Derivatives generally expire on Wednesday mornings. If that Wednesday or the Friday that is 30 days following that Wednesday is a Cboe Options holiday, the Volatility Derivative will expire on the business day immediately preceding that Wednesday.

Last Trading Day
The last trading day for VIX options is on the business day (usually a Tuesday) immediately before expiration. If that day is a Cboe Options holiday, the last trading day for an expiring VIX option will be the day immediately preceding the last regularly scheduled trading day.

The last trading day for VIX futures is on their expiration date (usually a Wednesday).* This is because VIX futures are permitted to trade during a portion of their expiration day. Trading in expiring VIX futures closes at 9:00 a.m. ET - 30 minutes before the auction is held on Cboe Options to determine their settlement value.

*If that Wednesday or the Friday that is 30 days following that Wednesday is a Cboe Options holiday, the last trading and expiration day for VIX futures will be the business day immediately preceding that Wednesday.

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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How is the settlement value for Volatility Derivatives determined and how is it different from the spot VIX Index?

The final settlement value for VIX futures and options is determined on the morning of their expiration date (usually a Wednesday) through a Special Opening Quotation ("SOQ") of the VIX Index. There are several ways in which the calculation of the SOQ of the VIX Index differs from the calculation of the VIX Index at all other times.

  • The SOQ calculation uses SPX, or SPXW, options from a single expiration 30 calendar days from the subject settlement day. Unlike the VIX Index calculation at other times, the SOQ calculation does not involve the interpolation of volatility calculated with near-term and next-term options.
  • Unlike the VIX Index calculation at other times, the determination of the strike range used for the SOQ calculation does not depend on whether options with consecutive strikes have zero bid prices. Cboe Options determines and announces the strike range to be used in the SOQ calculation. It does so by using an algorithm to determine the call with the highest strike and the put with the lowest strike to be used in that calculation. The strike prices used in the SOQ calculation include all put options within the strike range that have a strike price < K0, all call options within the strike range that have a strike price > K0, and both the put and call options that have a strike price equal to K0. Importantly, options within the Cboe Options determined strike range with a zero-bid price are eligible to be included in the SOQ calculation, which also differs from the calculation of the VIX Index at other times.
  • The SOQ calculation uses the "opening trade price" of each of the selected options, as determined pursuant to Cboe Options' rules during the special opening auction that Cboe Options conducts on days when Volatility Derivatives settle. This approach is different from the midpoint prices that are used to calculate the VIX Index at all other times. In the event that there is no opening traded price for an option, the opening price used in the SOQ calculation is the midpoint price of the highest bid and lowest offer at the time of the opening.

By providing market participants with a mechanism to buy and sell SPX options at the prices that are used to calculate the final settlement value for Volatility Derivatives, the VIX Index settlement process is "tradable."

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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What are the goals of a "tradable settlement?"

The VIX Index settlement process is patterned after the process used to settle A.M.-settled S&P 500 Index options. On the days SPX options expire, S&P calculates a Special Opening Quotation (SOQ) of the S&P 500 Index using the opening prices of the component stocks in their primary markets. Traders can replicate the exposure of their expiring SPX options by entering orders to buy and sell the component stocks of the S&P 500 Index at their opening prices. If they are successful, traders can effectively construct a portfolio that matches the value of the SOQ. At this point, the derivatives and cash markets converge.

In a very similar way, the final settlement value for Volatility Derivatives is a SOQ of the VIX Index calculated using the opening prices of SPX options that expire 30 days later. Analogous to the settlement process for SPX options, traders can replicate the exposure of their expiring Volatility Derivatives by entering buy and sell orders in SPX options that are used to calculate the SOQ. If they are successful, traders may be able to construct a portfolio of SPX options that matches the value of the VIX Index SOQ. By doing so, market participants may make or take delivery of the SPX options that will be used to settle Volatility Derivatives.

Dual Goals: Replication & Convergence
A tradable settlement creates the opportunity to convert the exposure of an expiring Volatility Derivative into the portfolio of SPX options that will be used to settle the expiring contract. Specifically, some market participants may desire to maintain the vega, or volatility, risk exposure of expiring Volatility Derivatives. Since Volatility Derivatives expire 30 days prior to the SPX options used to calculate their settlement value, a market participant may have a vega risk from its portfolio of index positions that the participant wants to continue to hold after the participant's Volatility Derivatives expire.

To continue that vega coverage post expiration for a Volatility Derivative, a market participant may determine to trade the portfolio of SPX options used to settle an expiring Volatility Derivative, since those SPX options still have 30 more days to expiration. This trade essentially replaces the uncovered vega exposure "hole" created by an expiring Volatility Derivative.

Convergence
Since the VIX Index settlement value converges with the portfolio of SPX options used to calculate the settlement value of Volatility Derivatives, trading this SPX option portfolio mitigates settlement risk. This is because, if done properly, the vega exposure obtained in the SPX option portfolio will replicate the vega exposure of the expiring Volatility Derivative (i.e., elimination of slippage). Further, because a market participant is converting vega exposure from one instrument (expiring Volatility Derivative) to another (portfolio of SPX options expiring in 30 days), the market participant is likely to be indifferent to the settlement price received for the expiring Volatility Derivative.

Importantly, purchasing the next Volatility Derivative expiration (i.e., rolling) will not accomplish the conversion of vega exposure since that Volatility Derivative would necessarily cover a different period of expected volatility and is based on an entirely different portfolio of SPX options.

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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Where can I see the options series that will be used to calculate the final settlement value of Volatility Derivatives?

The SPX/SPXW series that will be used to calculate the SOQ of Volatility Derivatives is a subset of the “constituent series,” which is defined as all of the options in the applicable expiration.

The low-strike put and high-strike call to be used in the SOQ calculation are identified on Volatility Derivative Expiration dates on both the Cboe Options website and messages on the PITCH, TOP, Opening Process, and the Auction data feeds. Additionally, the Constituent Series are identified with Constituent Symbol Mapping messages on those same market data sources.

For detailed information on accessing Constituent Series definition, click here.

Originally posted (Oct 8 2019).

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When is the spot VIX Index value first disseminated on Volatility Derivatives Expiration Days?

On all days, including the expiration for volatility derivatives, the VIX spot value is disseminated during the GTH session from 3:15 a.m. ET until 9:15 a.m. CT. On expiration days for Volatility Derivatives, Cboe Options does not begin disseminating the VIX Index spot value during the RTH session until the Constituent Series have opened.

Originally posted (Oct 8 2019).

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How do I participate in the opening auction?

All quotes and orders (including customer and professional) are eligible to rest in the book, and orders with any valid Capacity may participate in the Volatility Opening Process. All orders may, but are not required to, include an “On-Open” contingency (i.e., Limit-On-Open, Market-On-Open, Settlement Liquidity Opening Order).

Originally posted (Apr 14 2016); updated (Feb 7 2017); updated (May 15 2018); updated (Oct 16, 2018); updated (Oct 8, 2019).

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What is a settlement liquidity opening order ("SLOO")?

A SLOO is a limit order type that may be submitted only after 9:20 a.m. ET on days when the final settlement value of expiring Volatility Derivatives is determined. A SLOO may be submitted only in Constituent Series and is used to add liquidity during the Volatility Opening Process. The Cboe Options system will automatically cancel any remaining portion of a SLOO, LOO (Limit-On-Open) or MOO (Market-On-Open) that does not execute during the Volatility Opening Process. SLOO Orders are designed to enable imbalance satisfying orders to be submitted while ensuring that such orders do not add to or create an imbalance which would prevent the option from opening. Accordingly, if the specified Limit Price on a SLOO order is more aggressive than the “Opening Collar” midpoint, the SLOO order will be adjusted to the Opening Collar midpoint. The Opening Collar is defined as the midpoint of the Appointed Market-Maker Quote (AMMQ) BBO plus and minus half of the applicable maximum width for the AMMQ. A buy SLOO that is more aggressive than the Opening Collar midpoint is adjusted to equal the Opening Collar midpoint (rounded up to the nearest minimum quote increment). A sell SLOO whose originally specified Limit Price is more aggressive than the Opening Collar midpoint is adjusted to the Opening Collar midpoint (rounded down to the nearest minimum quote increment), except when that midpoint is less than or equal to 0.175. When the Opening Collar midpoint is less than or equal to 0.175, sell SLOOs whose originally specified limit prices are less than 0.175 will remain at their originally specified limit price. If the Opening Collar midpoint changes during the Volatility Opening Process, Cboe Options’ system further adjusts the SLOO price to equal the new Opening Collar midpoint for that series up to the limit price of the SLOO.

Originally posted (Oct 14, 2019).

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When can orders and quotes be placed, modified or cancelled on Volatility Derivatives Expiration days?

On expiration days for Volatility Derivatives, there are no restrictions until 9:20 a.m. ET on the orders and quotes that users may enter in Constituent Series (except that Settlement Liquidity Opening Order, or SLOO, orders are not permitted before that cut-off time). All such orders and quotes may be modified or cancelled until that cut-off time. After the cut-off time and until the opening of trading in the Constituent Series, Cboe Options system accepts only SLOO orders from all participants and quotes from Market-Makers with an appointment in SPX (and changes or cancellations to such SLOO orders and quotes). The Cboe Options’ system rejects all other orders and quotes in a Constituent Series and all changes or cancellations to such orders and quotes.

For this reason, most users who place orders or quotes in a Constituent Series during the Volatility Opening Process are not able to change those orders and quotes to respond to market events that may occur between the cut-off time and the opening of the Constituent Series. After the cut-off time, only appointed Market-Makers are able to change such quotes, and only those who place SLOO orders are able to change such SLOO orders.

Originally posted (Oct 8 2019); updated (Oct 8, 2019)

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What type of information does Cboe Options disseminate prior to the auction?

The lead up to the opening auction is open and transparent on all trading days, including expiration days for Volatility Derivatives. Beginning at approximately 8:30 a.m. ET, expected opening information (EOI) messages are disseminated during the pre-open state regarding Constituent Series.

EOI messages are published to Cboe Options’ website on expiration days for Volatility Derivatives and are disseminated approximately every five (5) seconds as Auction Update messages on the PITCH, TOP, Opening Process, and the Auction data feeds. The same data are presented with five (5) second updates on the Cboe Options website as well as the CFE Futures website. For detailed information on accessing Expected Opening Information for Constituent Series during the Volatility Opening Process click here.

Originally posted (Apr 14 2016); updated (Dec 27 2016); updated (Feb 6 2017); updated (May 15 2018); updated May 31 2018); updated (Oct 8, 2019).

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How is the opening price of an option determined during the Volatility Opening Process?

The opening prices for the SPX/SPXW options used to calculate the final settlement value of Volatility Derivatives are determined through Cboe Options’ proprietary Volatility Opening Process that matches locked or inverted buy and sell orders and quotes resting on the electronic order book at the opening of trading. This auction mechanism uses modified opening procedures on expiration days of Volatility Derivatives. All limit orders and quotes priced better than the opening price and market orders will be executed in full, while orders and quotes priced exactly at the clearing price will receive a pro-rata allocation.

In the event that there is no opening traded price for an option, the opening price used in the SOQ calculation is the midpoint of the BBO at the time of the opening.

On expiration days for Volatility Derivatives, Cboe Options narrows the Opening Collar Width (“OCW”) and Maximum Composite Width (“MCW”) parameters for Constituent Series. The OCW parameter is used to define the maximum allowable range of possible opening prices. The MCW defines the widest allowable Composite Market width, beyond which the option will not open.

For series that will have an opening trade, the opening trade must be at a price within a valid range. The calculation for the valid range is the midpoint of the Composite Market plus/minus half of the OCW, rounded outward to the nearest valid price increment. The OCW is based on the Composite Market best bid for the series (see table below).

Narrowed OCW and MCW Parameters on Expiration Days for Volatility Derivatives
Composite Market Bid OCW MCW
0.00 - 0.25 0.25 0.25
0.26 - 0.50 0.30 0.30
0.51 - 1.00 0.35 0.35
1.01 - 2.00 0.40 0.40
2.01 - 5.00 0.60 0.60
5.01 - 10.00 0.70 0.70
10.01 - 20.00 1.00 1.00
20.01 - 30.00 1.80 1.80
30.01 - 40.00 2.40 2.40
40.01 - 50.00 3.00 3.00
50.01 - 100.00 6.00 6.00
100.01 - 200.00 9.00 9.00
≥ 200.01 14.00 14.00

Originally posted (Apr 14 2016); updated (May 15 2018); updated (Oct 8, 2019).

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Are all SPX series with a traded price included in the SOQ to settle expiring Volatility Derivatives?

Not all eligible SPX option series with a traded price are included in the SOQ that is used to settle expiring Volatility Derivatives. Only those SPX/SPXW series that are selected by Cboe Options algorithm will be used to calculate the SOQ.

Originally posted (Apr 14 2016); updated (May 15 2018); updated (Oct 8, 2019).

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Is there a difference between Volatility Derivatives that settle to a value calculated using standard SPX options vs. weekly SPX options?

Yes. The VIX Index formula has a "time to expiration" component. As a result, the "time to expiration" component used to calculate the SOQ for expiring Volatility Derivatives is different based on whether standard SPX options are used or whether weekly SPX options are used. This is because standard SPX options are A.M.-settled and expire at 9:30 a.m. ET on their expiration day and SPX weekly options are P.M.-settled and expire at 4:00 p.m. ET on their expiration date.

With some exceptions, including holidays and market disruptions, the "time to expiration" component used for expiring standard Volatility Derivatives to calculate the SOQ is exactly 30 days. Subject to the same exceptions, the time to expiration for expiring weekly Volatility Derivatives value is 30 days plus 390 minutes.

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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Why are there differences between the Intraday (Spot) VIX Index Value and the Settlement VIX Index Value?

The components of these calculations are different, and that difference can yield different values for the calculations.

Importantly, the intraday (or spot) value of VIX Index is calculated using the midpoint of the BBO and involves the interpolation of volatility calculated with near-term and next-term options. The final settlement value for expiring Volatility Derivatives is calculated using the opening trade prices, when there is an opening trade, of series from a single SPX expiration 30 calendar days from the subject settlement day. In the event that there is no opening trade for an option, the opening price used in the SOQ calculation for that option is the BBO midpoint. The SPX option values used to calculate the intraday (or spot) value of the VIX Index are not tradable prices since they are the midpoint of the current BBO. Because actual traded prices are used to calculate the settlement value for expiring Volatility Derivatives, those traded prices tend to lean toward the bid or the ask for the given SPX series. Only rarely will traded prices lean toward the midpoint of the bid/ask spread. As a result, the settlement value calculated for expiring Volatility Derivatives will tend to lean closer to either the bid or the ask and this value will typically deviate from the intraday (or spot) value calculated for the VIX Index.

Originally posted (Apr 14 2016); updated (Oct 8, 2019).

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How is the settlement price for VIX futures calculated on non-expiration days?

Pursuant to CFE 1202(p), the daily settlement price, which is used to determine the variation payment for a VIX futures contract, is generally calculated from the average of the bid and the offer from the last best two-sided market for the VIX futures contract on CFE during the applicable business day prior to the close of regular trading hours on that business day. The last best two-sided market is a market that simultaneously includes both a pending bid with a non-zero value and a pending offer with a non-zero value.

Originally posted (Apr 14 2016); updated (Jan 18 2018); updated (May 15, 2018), updated (Oct 23, 2019).

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What is the closing price for VIX options on non-expiration days?

The closing price, which factors into the strategy-based margin requirement for a VIX option contract, is the last sale price of the VIX option contract during regular trading hours on the applicable non-expiration day.

Originally posted (Apr 14 2016); updated (Oct 8, 2019), updated (Oct 23, 2019).

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VIX Index Market Advisory Notices

Information about VIX Index Market Advisory Notices is available here.

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VWB/VWA Indexes

Cboe Options calculates the Cboe VIX Indicative Bid Index ("VWB") by applying the Cboe VIX methodology to SPX and SPX Weekly option bid quotations. Cboe Options calculates the Cboe VIX Indicative Ask Index ("VWA") by applying the Cboe VIX methodology to SPX and SPX Weekly option ask quotations. For additional information, click here.

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