Exclusive: CBOE VIX options froze at open – exchange official


FILE PHOTO: People walk by the Chicago Board Options Exchange (CBOE) Global Markets headquarters building in Chicago, Illinois, U.S., September 19, 2018. REUTERS/Michael Hirtzer

(Reuters) – Trading in options on Wall Street’s fear gauge was impossible in the first minutes of Monday’s session due to a complete absence of prices from the market makers on whom trading depends, a representative of index operator CBOE Global Markets Inc (CBOE.Z) said. CBOE Senior Trade Desk Specialist Ryan Stone told Reuters that VIX options were tradable at 9:51 a.m. ET (1351 GMT) but a lack of liquidity led to a lag of about seven minutes until the first trade, around 9:58 a.m. ET.

When activity in options resumed, the VIX surged to its highest level since December 2008. The volatility spike occurred as global stock markets were melting down on fears about the spreading coronavirus and crashing oil prices.

It followed 15-minute trading halts across U.S. exchanges, triggered by an opening 7% decline in the S&P 500 .SPX that set off circuit breakers.

The S&P was last 7.7% down and the VIX was up 13 points at 55.04.

According to CBOE’s website, the VIX Index is calculated using standard S&P 500 options and weekly S&P 500 options that are listed for trading on CBOE Options.

“What caused the delay in opening SPX & VIX – with these being products – is we had to manually open them,” Stone said.

“We gave market makers the delay to ensure they were getting proper market data so they could properly quote these.”

In line with its own rules, CBOE had earlier taken a “precautionary measure” to not open the VIX to trading before the bell as it was not able to calculate the index value at the time, after E-mini futures on the S&P 500 EScv1 hit their 5% lower limit in premarket trade.

The VIX index is widely used by traders as a measure of expected volatility of the S&P 500 over the following 30 days and is traders main way of protecting against or betting on sharp moves in stocks.

Reporting by Aaron Saldanha; Editing by Alden Bentley and Nick Zieminski

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