Short-term options: clienteles, market segmentation, and event trading
Date
2015-09-10
Authors
Chatrath, Arjun, author
Christie-David, Rohan A., author
Miao, Hong, author
Ramchander, Sanjay, author
Journal of Banking & Finance, publisher
Journal Title
Journal ISSN
Volume Title
Abstract
We compare clientele and information share in weekly- (Weeklys) and monthly-expiring options (Monthlys) on the S&P 500 index. Striking dissimilarities between the two instruments are found, most apparent being the much smaller trade size and substantially higher implied volatility in Weeklys, consistent with both speculation and event trading. Additionally, the price discovery contribution of Weeklys, albeit modest when compared to the underlying index itself, is substantially larger than that of Monthlys. The cumulative evidence points to an increasingly segmented options market. Thus, studies employing only standard options to investigate price discovery will likely underestimate the informational role of options.
Description
Includes bibliographical references (pages 31-33).
Published as: Journal of Banking & Finance, vol. 61, pp. 237-250, December 2015, https://doi.org/10.1016/j.jbankfin.2015.09.001
Published as: Journal of Banking & Finance, vol. 61, pp. 237-250, December 2015, https://doi.org/10.1016/j.jbankfin.2015.09.001
Rights Access
Subject
weeklys
Greeks
monthlys
implied volatility
spread
price discovery