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 May2021 was conducted smoothly without any issues. The settlement value was slightly higher than the spot index values.
There were several SPY option trades during this SPIKES settlement for a total volume of 8 lots. The mid-price of National Best Bids and Offers (NBBOs) were used for all other 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 marginally higher in the PUT1 strike range and consistent otherwise.
Compare actual settlement options volume with variance swap formula projection.
There were six 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 mostly consistent with the corresponding CRP values across the entire strike range.
Strike by strike comparison of SRP and the corresponding CRPs.
The CRP range for the SPY options was up to 9c wide at the near-the-money strikes and no more than 1-2c wide at the out-of-the-money strikes. The SRPs were 6-9 cents higher than the corresponding CRP values in the 350-380 strike range; otherwise they were never more than few cents away from the CRP 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 CRP values, due to marginally higher SRP values in the PUT1 and PUT2 strike ranges.
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 far-out-of-the-money strikes led to 3-4 additional strikes being included in the settlement calculation than the CRP values would imply.