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Currently reading the paper of John M. Griffin and Amin Shams "Manipulation in the VIX?".

My questions has to do with settlement of VIX derivatives (options and futures on VIX). The paper states that the settlement takes place monthly when contracts reach maturity date. This is the time horizon where manipulation could happen because there is an auction in the opening between 7:45 and 8:15 (now 8:20). In this interval traders could increase volume for deep OTM options buy offering bid-prices.

So, what I have not cleared is the mechanism of the settlement. Do the options and futures on VIX expire on the previous day before settlement or it is the same day?

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From the CBOE website:

https://cfe.cboe.com/cfe-products/vx-cboe-volatility-index-vix-futures/settlement-information-for-vix-derivatives

Calculating Settlement Values for VIX Derivatives VIX options and futures are based on the Cboe Volatility Index, a measure of 30-day expected volatility of the S&P 500 Index. The final settlement value for VIX futures and options is a Special Opening Quotation (SOQ) of the VIX Index calculated using opening prices of constituent SPX or SPX Weekly options that expire 30 days after the relevant VIX expiration date. For example, the final settlement value for VIX derivatives expiring on January 21, 2016 will be calculated using SPX options that expire 30 days later on February 20, 2016. If there is no opening trade, the opening price is the average of an option's bid and ask price determined at the open.

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  • $\begingroup$ If the manipulation window is the settlement day,usually Wednesday for derivatives on VIX,then the manipulation should take place in this day's market open,since Tuesday is the final trading day. So,the recent rise of VIX happened at 5th of February, Monday. Could traders influence Monday's prices or is it an uncorrelated phenomenon? $\endgroup$ – alexbougias Mar 6 '18 at 8:55
  • $\begingroup$ The alleged manipulation, it is takes place at all, takes place between 7:45 and 8:20 on the Wednesday morning of the contract expiration (and it affects only those few who are long or short the expiring contract, most people as you said have gotten out at the tue close). Other strange phenomena that take place at other times and for other contracts must have other explanations. $\endgroup$ – Alex C Mar 6 '18 at 13:06

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