SPIKES™ Volatility Index (index symbol: SPIKE) is a measure of the expected 30-day volatility in the SPDR S&P 500 ETF (SPY). SPY is the largest exchange traded fund in the world and tracks the most watched stock index in the United States.
SPIKES™ is built using the popular variance swap methodology and uses live option prices to calculate volatility. This is consistent with the way the trading community is used to modeling risk and hedging exposure.
SPIKES™ is traded on MIAX—one of the fastest and most efficient options platforms in the world, offering fully electronic execution.
The SPIKES Index and volatility products offer a number of unique features designed to produce highly accurate, robust data and create a transparent and open auction settlement process.
Volatility is the amount of variation in a time series of prices, measured by the standard deviation of log returns. Historical volatility is based on what was observed in the past, and implied volatility is the expected future volatility derived from the options market's prices. The implied volatility over the next 30 days is a common measurement used to compare volatilities of different time periods or different instruments.
The SPIKES Volatility Index measures expected 30-day volatility in the SPDR® S&P 500® ETF Trust (SPY) options.
SPIKES uses SPY option prices and interpolates between two expirations' computed variances to determine the 30-day volatility. The full index methodology guide is available here.
Using SPY options inputs provides a high degree of accuracy. The options are multiply listed across many venues, ensuring no single point of failure for the option price inputs to the index.
SPIKES Price Dragging technique prioritizes trades over quotes, and updates option price inputs using an algorithm designed to insulate the index from erratic movements in the bid-ask spread of constituent options by only considering order submissions which change the market in a meaningful way.
SPIKES truncates SPY options inputs at consecutive 5 cent bids which reduces the number of low-priced components in the index. This decreases the potential to distort the index value as fewer far out-of-the-money puts are used in the calculation of the index.
SPIKES is calculated and disseminated every 100 milliseconds, ensuring timely and accurate representation of actual market conditions.
The full index methodology guide is available here.
SPIKES has been developed by T3 Index - a research-driven financial indexing firm focused on developing innovative, investible proprietary indices that transform the way people invest and manage risk.
Cash settled index options are available on MIAX Options. The ticker is SPIKE.
No. Since the SPIKES index components change over time, it is impossible to hold the index itself.
The final settlement value is calculated from actual opening prices of SPY options on MIAX Options through the SPIKES™ Special Settlement Auction and makes use of a new Special Settlement Imbalance Process (SSIP).
A document explaining the settlement value in detail is available here (link to settlement process guide).