Directional information effects of options trading: Evidence from the banking industry

Du, Brian; Fung, Scott

doi:10.1016/j.intfin.2018.02.009

Cited by 6 publications

(5 citation statements)

References 67 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Along similar lines, Chan et al (2002) show that positive (negative) call (put) returns have a positive impact on stock returns. Our directional information measures however generalize the findings of Du and Fung (2018), relying solely on option market information. Finally, Tsai et al (2015) show that trading volume in the volatility index (VIX) option market conveys no significant predictive information for the underlying VIX index.…”

Section: The Informational Role Of Option Trading Intensitysupporting

confidence: 73%

“…Further, we confirm previous research on the directional information of option informed trading. In particular, Du and Fung (2018) use the call‐to‐stock volume and put‐to‐stock volume ratios to proxy for directional informed trading in the options market. They show that, for the banking industry, call and put options have differential information roles in predicting underlying stock returns.…”

Section: The Informational Role Of Option Trading Intensitymentioning

confidence: 99%

See 1 more Smart Citation

Information and the arrival rate of option trading volume

Zhang

Verousis

Kalaitzoglou

2021

Journal of Futures Markets

View full text Add to dashboard Cite

In this paper we investigate the interaction between liquidity and information in the options market and its impact on the pricing of the underlying asset. We model option trade duration and volume jointly, for the first time, as a natural measure of options' trading intensity and we associate it with differential degrees of information present in option trades. We report a highly significant association between option trading intensity with contemporaneous and future underlying volatility and returns, which is robust to the presence of other information measures, market factors, and structural forms.

show abstract

Section: The Informational Role Of Option Trading Intensitysupporting

confidence: 73%

Section: The Informational Role Of Option Trading Intensitymentioning

confidence: 99%

Information and the arrival rate of option trading volume

Zhang

Verousis

Kalaitzoglou

2021

Journal of Futures Markets

View full text Add to dashboard Cite

show abstract

“…From global literature, the results are in line with the findings of Lee and Nayar (1993) who remarked that cash, futures and options segments on S&P 500 index in the USA are cointegrated, Kyriacou and Sarno (1999) who showed that there exists a simultaneous temporal relationship between spot market and its derivative counterparts in FTSE 100 index in the U.K, Bali and Hovakimin (2009) who found that information spilled over from KOSPI 200 index options market to the underlying stock market, Byoun and Park (2015) who noted that KOSPI 200 index options market was leading its spot counterpart in its initial phase and Ryu and Yang (2017) who found that the price discovery happens in both futures and options segments altogether and concluded that the stock market lagged behind the derivative markets. The results of the current study gain support from Fleming, Ostdick, and Whaley (1996), Holowczak, Simaan, and Wu (2007), Kim, Kim, and Nam (2009), Ahn, Bi, and Sohn (2018) and Du and Fung (2018) which rigorously employed different techniques and finally concluded this nature of the options market.…”

Section: Suitability Of Options Market For Hedgingsupporting

confidence: 68%

Is Indian Equity Options Market Suitable for Hedging When the Options Payoff Structure Changes?

Varghese¹,

Jose²

2020

GJMBR

View full text Add to dashboard Cite

Investments are essential as the growth of the stock market denoted through increased investments results in the growth of the economy. But they are always subject to various risks in the market. These risks are to be mitigated for the development of an efficient economic system by the market itself. Apart from the stock segment, the Indian financial market is a home for futures and options segments that facilitate the hedging of risks involved in the investments. For considering any derivative market as a hedging tool, one of the prerequisites is the presence of integration between such derivative market and its underlying market. The present study focuses on testing the relationship between Indian stock market and the options market, represented by NSE Nifty 50 index and index options on it respectively, to know whether the options segment is suitable for hedging the risks implicit with investments in the stock market, with substantial consideration to payoff structure of the market denoted by different moneyness groups viz.

show abstract

“…Along similar lines, Chan et al (2002) show that positive (negative) call (put) returns have a positive impact on stock returns. Our directional information measures however generalise the findings of Du and Fung (2018), relying solely on option market information. Finally, Tsai et al (2015) show that trading volume in the VIX option market conveys no significant predictive information for the underlying VIX index.…”

Section: Option Trading Intensity and Underlying Asset Returnsmentioning

confidence: 62%