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 SPIKES settlement auction for January 2020 was conducted smoothly without any issues. The settlement value was slightly higher than the spot index values (CRP1 and CRP2).
There were no SPY option trades during this SPIKES settlement. The mid-price of National Best Bids and Offers (NBBOs) were used for all 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 mostly in line in the ATM, PUT1 and PUT2 strike ranges, and higher in the CALL strike range.
Compare actual settlement options volume with variance swap formula projection.
There were no SPY option trades during this SPIKES settlement auction.
A visualisation of the settlement option prices and their equivalents in the SPIKES index calculation.
The Settlement Reference Prices (SRPs) were broadly in line with the CRP values below the 335 strike.Some of the higher strikes had zero CRPs at the time of this SPIKES settlement.
Strike by strike comparison of SRP and the corresponding CRPs.
The CRP range for the SPY options was mostly 0c; it was large for a couple of near-the-money strikes due to zero CRP1 values. The SRPs were mostly within 0.5c compared to the CRP values across the ATM, PUT1 and PUT2 strike ranges. The SRPs were noticeably higher than the CRPs in the CALL strike range.
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 slightly higher than the CRP2 value, due to slightly higher SRP values in the ATM strike range. Occasional zero option values resulted in a much narrower range of strikes in the calculation of CRP1.
Replace some or all of the SRPs with the CRPs and see how many SPY options are used in the settlement calculation.
Higher SRP values in the ATM, PUT2 and CALL strike ranges led to several additional strikes being included in the settlement calculation than the CRPs would imply.