Retrieving aggregate information from option volume

Zheng, Zhenlong; Qiao, Shuai

doi:10.1016/j.iref.2017.07.018

Cited by 14 publications

(3 citation statements)

References 23 publications

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“…If such investors have superior information, their options trades predict the underlying asset returns. Many studies find evidence supporting the existence of direction‐informed options trading (Cao, Chen, & Griffin, 2005; Ge, Lin, & Pearson, 2016; Hu, 2014; Johnson & So, 2012; Lin, Tsai, Zheng, & Qiao, 2018; Roll, Schwartz, & Subrahmanyam, 2010).…”

Section: Related Literaturementioning

confidence: 99%

The impact of net buying pressure on index options prices

Ryu

Yang

2020

Journal of Futures Markets

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This study examines whether the demand for options, as measured by the net buying pressure of index options, explains the implied volatility structure created by options prices. We decompose the buying pressure into the direction‐motivated (i.e., delta‐informed) and the volatility‐motivated (i.e., vega‐informed) demand for options. After controlling for options traders' hedging demand, we find that both delta‐ and vega‐informed trading play significant roles in explaining changes in implied volatility. Foreign institutions are more directionally informed in index options trading than their domestic counterparts are. Domestic investors effectively implement volatility trading using put options.

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Section: Related Literaturementioning

confidence: 99%

The impact of net buying pressure on index options prices

Ryu

Yang

2020

Journal of Futures Markets

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“…In this study, based on the detailed classifications that consider the properties of each option transaction, we reexamine the directional information content of various options trades in the KOSPI 200 options market. We classify options trades not only by the initiating investor and trade types but also by whether the investor opens or closes his or her position, as the purpose of a trade and its directional information content may differ along this axis (Lin, Tsai, Zheng, & Qiao, ; Pan & Poteshman, ). By tracing the net positions of options traders, we can identify whether each transaction opens a new position or closes an existing position.…”

Section: Introductionmentioning

confidence: 99%

The directional information content of options volumes

Ryu

Yang

2018

Journal of Futures Markets

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This study examines the directional information content realized by trades in a highly liquid options market by constructing put–call volume ratios and decoupled options‐to‐spot volume ratios. By investigating whether the specific investor type predicts underlying returns and the method used to exploit a directional information advantage, we find that foreign investment firms can leverage their directional information by executing buy trades to open new positions. Their open‐buy trades significantly predict next‐day spot returns, whereas trades initiated by domestic firms do not. This relationship becomes stronger for out‐of‐the‐money, large, and short‐horizon options trades and during the short‐sale restriction period.

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“…Manaster and Rendleman (1982) utilized call options as an estimator of equilibrium price; Murevyev et al (2013), Kumar (2016), Patel et al (2016), Liu et al (2017) used options implied price to measure the price discovery role; Galariotis et al (2014) examined the trading behaviour of the US and UK markets on account of large price changes. Likewise, options volume data are applied to measure the contemporaneous price impact (Schlag & Stoll, 2005) and to modify the option information aggregation method of Holowczak (Lin et al, 2018). All these applications of options market variables are evidence for non-redundant nature of options.…”

Section: Introductionmentioning

confidence: 99%

Informational Role of Open Interest and Transaction Volume of Options: A Meta-Analytic Review

Avinash¹,

Mallikarjunappa

2020

FIIB Business Review

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The study examines the research literature pertaining to the informational content of open interest and transaction volume in a systematic manner. Our review upheld their informational role in estimating the price of the underlying stock in future, in predicting future volatility and in ascertaining the market behaviour around corporate/macro-economic announcements with mixed directional effect. Further, through well-defined inclusion/exclusion criteria, we choose 38 research works to uncover the factors and conditions upon which open interest and transaction volume are more informative via meta-regression. The temporal and spatial factors indicate that open interest and transaction volume are more informative in an emerging market as compared to a developed market.

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Retrieving aggregate information from option volume

Cited by 14 publications

References 23 publications

The impact of net buying pressure on index options prices

The impact of net buying pressure on index options prices

The directional information content of options volumes

Informational Role of Open Interest and Transaction Volume of Options: A Meta-Analytic Review

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