The Volatility Surface page displays the volatility surface for vanilla options. By default, the Volatility Surface page opens with the volatility surface for the current commodity in the pricing page from which it was opened.
The Volatility Surface page is accessed:
From the ribbon bar in the Trader tab or the Market Data tab by clicking the Vol Surface button.
From the System Menu (accessed by clicking the Open button in any tab in the ribbon bar) > Volatility Surface.
By clicking the Volatility Surface tab on the left hand side of the pricing page.
How Is the Volatility Surface Presented?
The volatility surface for each commodity consists of the mid implied volatility (expressed as a percentage) for each strike for a variety of contracts.
The contracts displayed are based on either exchange dates or system-defined dates, as you choose.
In addition, depending on how you prefer to trade and quote options, you can choose to display the volatility surface for the chosen contracts in a number of ways. For:
Exchange-traded commodities you can display the volatility surface in terms of delta, % change of forward or exchange strikes for either American-style or European-style options.
OTC commodities you can display the volatility surface in terms of delta or % change of forward (in accordance with market convention).
When you display the volatility surface in terms of delta or as a % change of forward, whether the ATM volatility is the ATM delta neutral volatility or the ATM forward volatility and whether the ATM strike is the ATM delta neutral strike or the ATM forward strike depends on two things—whether the asset is a precious metal or not and on whether the display is for delta or a % change of forward. This is described in detail as follows:
For precious metals:
In the Delta display the middle column (which is labelled ATM Delta Neutral) shows ATM delta neutral volatilities and the ATM delta neutral strikes.
In the % Change of Forward display the middle column (which is labelled ATMF) shows ATM forward volatilities and ATM forward strikes.
For all other assets:
In the Delta display the middle column (which is labelled ATMF) shows ATM forward volatilities and ATM forward strikes.
In the % Change of Forward display the middle column (which is labelled ATMF) shows ATM forward volatilities and ATM forward strikes.
How Is the Volatility Surface Created in SDX Commodities & Energy?
For each contract, the implied volatilities are calculated using SD’s proprietary model and the following three pieces of data:
ATMF volatility
25 Delta collar
25 Delta strangle
The data used is initially the real-time market data.
The following topics are covered in this section:
Buttons and Fields in the Volatility Surface.
What can be Done in the Volatility Surface Page?.