I've been observing that options on /es has a higher IV than the options on SPY even though they're both tracking the S&P 500. What causes this? Doesn't this mean that the options on /es is more expensive in general than the SPY?

Also, why do longer-dated expiration options have higher IV?

  • $\begingroup$ What is your source for IVs? If you are computing them yourself what formulas are you using? $\endgroup$
    – nbbo2
    Jul 23, 2021 at 17:05
  • 1
    $\begingroup$ I'm using tastyworks for the iv $\endgroup$
    – Jay C
    Jul 23, 2021 at 20:12

1 Answer 1


These observations do not hold through time or moneyness in general. A few remarks below:

EMINI and SPY are not the same underlying! The CME has a document highlighting some key differences.

Trading hours:

SPY: Primary exchange for SPY options is in San Fran and local trading hours are 6:30 - 16:15 according to Bloomberg.

ES - Emini options on CME trade from 17:00 - 16:00 local hours.

Now ignoring everything else, more time is more potential for movement. If you simply compare daily historical vol (SD of log returns) of SPY US Equity vs ES1 index (stringing together active contracts over time), you see a noticeable difference in hist vol of daily close as well.

enter image description here

While there is a well defined relationship between spot and futures contracts, they can deviate and be priced higher or lower because they represent "expected" future prices rather than current prices. October, 1987 was an extreme example. The DEC contract was 18% less than the S&P500 Index at one point.

Also, it really depends on moneyness and tenor as well (liquidity will play a role, as does contract size).

enter image description here

enter image description here

enter image description here

SPY and SPX itself are also not identical (the former are American, the latter European and despite de-Americanizing them for surface creation, there will be differences).

With regards to the term structure, that is not generally applicable. Frequently, it is upward-sloping, which implies that investors expect to see the volatility (risk) of the market going up in the future. Or put differently, it seems reasonable to predict near term changes with a greater degree of certainty compared to something in the distant future (bit like weather forecasts). However, look at March last year, short term vol was a lot higher than long term vol.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.