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 (CRP2 in particular as CRP1 was less relevant).
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 slightly higher across all the strike ranges.
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 CRP2 values across all strike ranges. CRP1 has zero value at a lot of the out-of-the-money strikes.
Strike by strike comparison of SRP and the corresponding CRPs.
The CRP range for the SPY options was often rather wide at this settlement, due to a lot of out-of-the-money strikes having zero CRP1 values. The SRPs were mostly within 0.5c compared to the CRP2 values across all the strike ranges.
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 inthe PUT2 strike range. Zero option values in the out-of-the-money strikes 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 PUT2 strike ranges led to five additional strikes being included in the settlement calculation than the CRP2 values would imply.