SRP: Settlement Reference Price for each SPY option, used in final SPKCS calculation.
CRP1: Cash Reference Price (used in SPIKES index calculation) at time of SRP, (unique time for each SPY strike).
CRP2: Cash Reference Price (used in SPIKES index calculation) at settlement time, (same time for all SPY strikes).
The first SPIKES settlement auction went smoothly without any issues in March 2019. The settlement value was broadly in line with the spot index values (CRP1 and CRP2).
There were no SPY option trades during this SPIKES settlement. The mid-price of the National Best Bids and Offers (NBBOs) were used for all the SPY options included in the final settlement calculation.
Relative to the Cash Reference Prices (CRPs) used in the SPIKES index calculation, the Settlement Reference Prices (SRPs) were slightly higher (by 0.5c) across 3 of the 4 strike ranges (PUT 2, ATM and CALL). The SRPs were broadly the same as the CRPs in the PUT 1 range.
Compare actual settlement options volume with variance swap formula projection.
No SPY options were traded during this SPIKES settlement auction.
A visualisation of the settlement option prices and their equivalents in the SPIKES index calculation.
The Settlement Reference Prices were broadly in line with the Cash Reference Prices.
Strike by strike comparison of SRP and the corresponding CRPs.
The SRPs were often 0.5c higher than the corresponding CRPs.
Replace some or all of the SRPs with the CRPs in the settlement calculation and see how different the results are.
The SPKCS settlement value was higher than the CRP values by 0.05-0.06. These were mainly due to higher SRP values inthe PUT 2 range. Higher SRP values in the ATM range also made a contribution to the difference.
Replace some or all of the SRPs with the CRPs and see how many SPY options are used in the settlement calculation.
Higher SRPs in the PUT 2 range led to 3 additional strikes being included in the settlement calculation than the CRPs would imply.