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Alternative Market Briefing

MIAX Exchange launches VIX competitor

Wednesday, February 20, 2019

Bailey McCann, Opalesque New York:

A new competitor to the VIX launched today on the MIAX Options Exchange. The competitor - SPIKES - was created by T3 Index, an indexing firm, as part of a partnership with MIAX Options' parent holding company, Miami International Holdings, Inc.

The SPIKES Index is designed to track volatility in the market like the VIX. However, its options will act as a measure of the expected 30- day volatility in the SPDR S&P 500 ETF (SPY), instead of the S&P 500 Index (SPX).

"We think it's worthwhile to bring some competition to the volatility market and offer something that doesn't come with some of the trust issues associated with trading VIX," said Simon Ho, CEO of T3 Index in an interview with Opalesque.

SPIKES uses variance swap methodology and live SPY option prices to calculate volatility. SPIKES uses standard monthly SPY options which expire on the third Friday of every month to calculate the index.

According to Ho, traders will get faster information about market volatility as the index publishes every 100 milliseconds instead of every 15 seconds as with VIX. SPIKES also uses a proprietary 'price dragging' technique that is designed the minimize price distortions. Price Dragging uses eligible trades, bids, and offer prices to reduce erratic movements of the index value that could result from illiquid out-of-the-money options. The end result is a measure of volatility will print faster than the VIX in fast mar......................

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