Hello. Im truing to understand the VIX Options. I have one Question if you can answer me them yesterday 18/6/2013 was the last trading day for the VIX Jun 13 Options and Futures The Close was Vix Jun Futures 13 ==>16,80 VIX Index ===> 16,61 My Question: if i have in my Portfolio today 19/6/2013 this position -5 VIX Jun13'18 Call Options Yesterday at the Close the position was out of the Money BUT TODAY IS THE EXPIRATION DAY WHAT IF TODAY THE VIX SHOOT UP AND GOES 19 OR 20? IS MY POSITION STILL OUT OF MONEY? OR MAYBE I HAVE PROBLEM BECAUSE THE VIX INDEX TODAY,THE DAY OF EXPIRATION THE VIX INDEX IS MORE THAN 17? IM LITTLE CONFUSED ABOOUT THIS AND I CAN FIND NEVER THIS ANSWER. THATS WHY I ASK YOU THANKS
The VIX reading which option payoff is based is called the special opening quote (SOQ). It is published within a few hours of the expiration day's (today's) stock market open. The symbol is VRO. For this month, it was 17.22. Thus, the June 18 calls do not pay anything. Therefore, you will not have to pay on your short position. Congrats!
For future reference, short into exp is suicidal. If you go back through the history you'll see times when the settlement was 10 points higher than the previous night's close.
And there is no "in the money" or "out of the money" until the expiration date, because the payoff is based solely upon the special opening quotation (SOQ). This is also true for the VIX futures. There is no underlying security. The SOQ is even very different from the first VIX quote I get in the morning from my IB feed. So as far as I can guess, the SOQ is set during a conference call between Goldman Sachs and the CBOE according to their holdings.