We Built a Series of 0DTE VIX Instruments
Publicly available now! Learn how 0–7DTE options influence the volatility of major indices.
Option Screener and The Wheel Screener are trader-friendly option screeners that analyze, classify, and categorize all options available on the market on a given day. The team is always more than happy to share their technical insights, market opinions, and methodologies here on Medium. This article focuses on a new set of VIX Instruments that we’ve built for 0–7DTE options. We hope you enjoy the article!
The VIX
If you’re an investor or trader, you likely know that the VIX can be used to measure investors’ and market makers’ future views of volatility in the market. The VIX was designed and built by the CBOE to gauge near-term options against the “next” term, i.e. options expiring approximately 30 days out (or whatever expiry is closest to 30 days out). The calculation is ultimately the variance of those options at the near and next term, weighted and scaled by both strike price and expiration time, and then multiplied by 100 so the value of the instrument itself isn’t posted as an awkward looking decimal. If you’re interested in the very technical calculation steps, we found a great article by Magma Capital Funds that details the process, even including example calculations. The CBOE also has an extensive PDF on the methodology used to calculate the VIX.
0DTE Madness
However, as of late in the explosion of 0–7 DTE options in very popular indexes like SPY, QQQ, and IWM, the VIX has come under scrutiny that because of its “30 days out” nature, it doesn’t fully capture the volume and traffic (thus nor the full volatility picture) that these 0–7DTE options cause.
Say no more! Using the exact same original formula for VIX, we simply adopted it to change the ‘next’ term to 7 days instead of 30. Violá — the coveted and long desired 0DTEVIX, a gauge of how volatility investors and market makers view the market at the current trading day (0DTE) vs 7 days.
However, while we did recognize that 0, 1, 2, and so on DTE options would be useful against 30DTE options, we realized that the options environment at 0DTE compared to 30DTE could be so different at times that this value might be a bit ‘fragile’ to fully capture the short term option expiration environment. Therefore we also developed a variety of other VIX instruments which weigh 1DTE options against 8DTE options, 2DTE against 9DTE, and so on. We think that these values could be perhaps the most useful for 0DTE traders.
The 0DTE VIX Instrument Party
While we originally built the 0DTEVIX specifically for 0DTE options against options expiring in 7 days, we realized a variety of different instruments could be generated that could all be potentially useful for 0DTE trading in their own right. Specifically, the instruments we ended up with are:
Primary:
- 0DTEVIX — 0DTE against 7DTE
- 0–30DTEVIX — 0DTE against 30DTE — this is essentially the normal VIX calculation, but we are calculating it against SPY, so there may be small discrepancies since the options volumes and prices between SPY and SPX aren’t exactly identical. However, it should track against the official CBOE VIX quite closely. We’re working on calculating our 0DTEVIX against the SPX as soon as possible.
Secondary, but potentially useful:
- 1–8DTEVIX — 1 to 8
- 2–9DTEVIX — 2 to 9
- 3–10DTEVIX — 3 to 10
- 4–11DTEVIX — 4 to 11
- 5–12DTEVIX — 5 to 12
- 6–13DTEVIX — 6 to 13
- 7–14DTEVIX — 7 to 14
- 1–30DTEVIX — 1 to 30
- 2–30DTEVIX — 2 to 30
- 3–30DTEVIX — 3 to 30
- 4–30DTEVIX — 4 to 30
- 5–30DTEVIX — 5 to 30
- 6–30DTEVIX — 6 to 30
- 7–30DTEVIX — 7 to 30
Note in each of these, if we can’t find an expiration exactly at that number of days out (due to a holiday or weekend) we select the next available future date.
The calculations, while rather complex, aren’t especially time-consuming on the computation side, so we calculate each of these approximately every minute. Plot the values versus time, and you’ve got your instruments!
I Don’t Care About Math, Just Give Me the Data!
We’re building out a suite of charts, statistics, and tools to help investors and traders navigate the 0DTE landscape:
The chart and data for our various VIX instruments can be found here. You can toggle which curves you’d like to display, and we also post the values are posted in table format. If you’re interested, we also calculate real-time Gamma, Vanna, and Charm exposures on SPY options. The post about that methodology can be found here:
Thanks!
We hope you enjoy using our 0DTEVIX. Just note that while it is a free offering to the community for now, it will likely fall behind our paywall in a few weeks. Because of the complete site redesign and usability improvements, new features, and increased value, we’ve been adding to the site in recent months, we’re also going to finally increase our premium subscription from $5 to $10, which we think is still a very good value. You can read more about our decision to increase the subscription price here:
We’re on a mission to make options data accessible and a 100% customizable dashboard for any trader, from beginner to advanced.
Interested in learning more? Check us out at Option Screener and The Wheel Screener.
Until next time,
-The Wheel Screener Team
References and Further Reading
Many helpful resources were used to create this post:
