How is the calculation of the VIX SOQ different than the calculation of other VIX values? What can this mean for VIX options settlement?
It is important to note that the VIX SOQ is the only VIX calculation that uses traded prices. Every other reported VIX value uses mid-quote prices of SPX option series. Typically, the theoretical VIX bid/ask spread (i.e., the difference between VIX calculated using bid prices and VIX calculated using ask prices) is 0.8 to 1.2 VIX points. If the VIX SOQ is calculated using predominantly bid prices, or predominantly ask prices, there may be a significant difference between the exercise settlement value for VIX options and the reported VIX values (based on mid-quote prices) on expiration day as well as at the close on the day before expiration.
