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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ild who wrote (44835)	11/6/2005 3:00:57 PM
From: FiveFour	Read Replies (1) of 110194

ild, regarding VIX, I spoke with a V.P. from CBOE who I met at the Volatility Seminar in London. My question was about settlement price variations and 05 changes in calendar months traded vs 04. Here is what I learned: 4 months out the year, the VX futures settlements were not on a perfect 30 day cycle. This lead to calculating settlements from the lead option month series and part of the following month. A tendency to have one month open on the bid and the other open on the offer created a scenario for large derivations on settlement morning. Derivations from the index level, the VXB and previous days futures close. A decision to eliminate those 4 months provided only a short-term fix, as the open interest holders needed to have a current front month at all times...i.e to roll their positions. A CBOE systems fix now allows for a settlement to occur one week later than the normal expiry date. December will be the first of these and moving forward there will always be 4 months in a calender year where expiry Wednesday will occur one week after the third Friday of the month

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