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 December 2020 was conducted smoothly without any issues. The settlement value was modestly lower than the spot index values (CRP1 and CRP2).
There were two SPY option trades during this SPIKES settlement. The mid-price of National Best Bids and Offers(NBBOs) were used for most of the other SPY options included in the final settlement calculation. There were strikes that required exchange override.
Relative to the Cash Reference Prices(CRPs) used in the SPIKES index calculation, the Settlement Reference Prices (SRPs) were broadly in line across the strike range.
Compare actual settlement options volume with variance swap formula projection.
There were two SPY option trades during this SPIKES settlement auction for a total of 40 lots.
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, except in the 267-287 strike range where the SRPs are approximately 5c lower than the CRPs.
Strike by strike comparison of SRP and the corresponding CRPs.
The CRP range was mostly 0-1c wide across the entire strike range. The SRPs were mostly within 1c compared to the corresponding CRP values across most strikes. The SRP for 267-287 strike put options were 4-6c lower 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 slightly lower than the CRP1 and CRP2 values solely due to higher prices in the PUT2strike range.
Replace some or all of the SRPs with the CRPs and see how many SPY options are used in the settlement calculation.
The settlement calculation includes the same number of SPY option strikes as the cash index calculation implied by the CRPs.
