VIX Options

How VIX calls and puts work

A VIX call provides exposure to a higher volatility settlement value; a VIX put provides exposure to a lower value. The buyer pays a premium. These options concern expected S&P 500 volatility rather than the direction of the S&P 500 itself.

Use the final settlement value

The following hypothetical examples use a strike of 20 and a premium of 2 points. The USD 100-per-point multiplier makes the premium USD 200. In these calculations, the underlying value means the official final settlement value, not an ordinary VIX quote seen earlier in the day.

Buying VIX calls

A call gives its buyer upside exposure to the specified underlying. For this example, use a strike of 20 VIX points and a premium of 2 VIX points. With the stated multiplier of 100, the premium cost is USD 200.

At expiration with the underlying at 25, intrinsic value is (25 − 20) × 100 = USD 500. After the premium, the gain is USD 300 before other costs.

At or below the strike, the call has no intrinsic value and loses its whole premium. Breakeven at expiration is 22 VIX points. At 21, the call is in the money but still loses USD 100 after the premium.

Buying VIX puts

A put gives its buyer downside exposure. Assume the same 20 strike and 2-unit premium, costing USD 200 with the same multiplier. The equal call and put premiums are hypothetical, not a claim about actual market quotes.

At expiration with the underlying at 15, intrinsic value is (20 − 15) × 100 = USD 500. Subtracting the premium leaves USD 300 before costs.

At or above the strike, the put loses its full premium. Its breakeven is 18 VIX points. At 19, it is in the money but still loses USD 100 after the premium. Before expiration, time and implied volatility also affect the price; these expiry calculations do not predict its resale value.

Timing and settlement risk

VIX options are European-style and cash-settled. Their special settlement calculation can differ from the displayed VIX index. Before expiry, the price reflects expectations for that expiry, so a brief jump in spot VIX does not ensure a profitable call.

A purchased option can lose its entire premium. Volatility exposure is not a fixed offset for losses on a stock portfolio.

Understand the volatility market

VIX option pricing and settlement — Learn about forward expectations, the settlement calculation and hedging limitations.

VIX chart

The displayed VIX index is not the forward expectation for a particular option expiry or its official final settlement value.