SPYIX, pronounced “spikes”, is a new index for tracking volatility created by BATS. The index is calculated from options prices just like the VIX index created by the CBOE but with a slight twist.
VIX Price Calculation
The VIX uses the “mid” price which is the halfway point between the bid and the ask in the calculation. This method works just fine for the strikes with greater liquidity, usually at or near the money. During periods of increased volatility the bid and ask prices of deep OTM or ITM options can fluctuate with greater frequency. This can occur even if no trade took place.
SPYIX Price Calculation
SPYIX uses options prices from the SPY ETF rather than the SPX index and also uses a “price-dragging” technique for determining the option price. The idea behind this is that SPYIX will provide a more accurate depiction of volatility during these clusters of time.
During the latest announcement from the FED, it is clear that SPYIX may be a more helpful measure of volatility. As you can see in the above screenshot from a 2pm FOMC Wednesday, SPYIX clearly is not subject to the same whipsaw price movement as the VIX.