Most software packages that report option Greeks (e.g., delta, gamma, theta, implied volatility) report incorrect values for VIX options (LIVEVOL is a notable exception). Depending on the date and state of the market they can vary from almost correct to widely wrong–giving truly nonsense numbers. These packages assume that the VIX index is the underlying for the VIX options. This is wrong. The true underlying is the corresponding VIX future for that month (e.g., January VIX futures for January VIX options). Fidelity gets partial credit because they use the first-month future as the underlying instead of the VIX for all the VIX option series.
You can compute reasonably accurate delta and gamma values for VIX options yourself. You don’t even have to get a futures quote (although you can get CFE delayed quotes for free). It turns out that if you add 10 to the $10 strike VIX call option you are pretty close to the true price for the underlying volatility futures. Since the bid / ask spreads for these options tends to be pretty wide, you should split the the bid/ask price. This should get you within +-.15 of the true price. Then you can use options calculators to compute your IV and other greeks based on the underlying price and option price. One example :
|VIX Index||True VIX option underlying (volatility future)|
|IV||143||82 (correct number)|
- Near Real Time Graphical VIX Term Structure
- Volatility Related Indexes and Tickers
- Graphical VIX & VIXMO calculations
- Calculating the VIX—The Easy Part
- How Does the CBOE’s VIX® Index Work?
Sunday, November 8th, 2015 | Vance Harwood