VIX settlement occurs on the Wednesday morning 30 days before the next SPX expiration using the Special Opening Quotation (SOQ). The SOQ is calculated from opening prices of a specific strip of SPX options, which can differ significantly from spot VIX.
⚡ KEY TAKEAWAY: VIX settlement values regularly deviate 1-3 points from spot VIX at the prior close. If you trade VIX options, always compare your strikes to the corresponding VIX futures, not spot VIX.
Why It Matters
VIX settlement mechanics are the single most misunderstood aspect of VIX trading. The SOQ can deviate 1-3 points from the prior day's VIX close, turning apparently profitable positions into losers and vice versa.
How It Works
On settlement Wednesday, the CBOE calculates the SOQ from the opening prices of a specific strip of SPX options. Each option in the strip must open; if it does not, it is excluded. The SOQ is not the same as spot VIX at the open because it uses actual opening prints, not mid-prices.
Example
A trader sells VIX 22 calls when VIX closes at 19 on Tuesday. On Wednesday morning, the SOQ comes in at 23.50 due to an unusual opening rotation in SPX options, even though spot VIX opens at 20. The calls settle $1.50 ITM despite VIX never reaching 22 on the spot tape.
Common Mistakes
Traders hold VIX options through settlement expecting the close to match the SOQ. The SOQ is an independent calculation that can print 1-3 points away from spot VIX. Always close VIX options before settlement Wednesday or hedge with offsetting positions.
VIX settlement occurs on the Wednesday morning 30 days before the next SPX expiration using the Special Opening Quotation (SOQ). The SOQ is calculated from opening prices of a specific strip of SPX options, which can differ significantly from spot VIX.
Why does VIX Settlement matter for premium sellers?
VIX settlement values regularly deviate 1-3 points from spot VIX at the prior close. If you trade VIX options, always compare your strikes to the corresponding VIX futures, not spot VIX.
How does VIX Settlement work?
On settlement Wednesday, the CBOE calculates the SOQ from the opening prices of a specific strip of SPX options. Each option in the strip must open; if it does not, it is excluded. The SOQ is not the same as spot VIX at the open because it uses actual opening prints, not mid-prices.
What are common mistakes with VIX Settlement?
Traders hold VIX options through settlement expecting the close to match the SOQ. The SOQ is an independent calculation that can print 1-3 points away from spot VIX. Always close VIX options before settlement Wednesday or hedge with offsetting positions.
