The Relationship between Option Trading Intensity and the Market Microstructure of the Underlying Security PDF Download
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Author: Stewart Mayhew
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the differences in stock market volume, volatility and quotes during intervals in which options trade versus periods in which options do not trade. We find that options trade when the stock market is active and volatile. However, there is a negative relationship between short run volatility and option trading intensity. Also, bid-ask spreads are higher and the depth of the quotes is lower when options trade. This is partially because the probability of a transaction occurring within the spread and the autocorrelation between successive price changes is higher in option trading times, but this deterioration in quotes is not accompanied by an increase in adverse selection or inventory costs and needs further investigation.
Author: Stewart Mayhew
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the differences in stock market volume, volatility and quotes during intervals in which options trade versus periods in which options do not trade. We find that options trade when the stock market is active and volatile. However, there is a negative relationship between short run volatility and option trading intensity. Also, bid-ask spreads are higher and the depth of the quotes is lower when options trade. This is partially because the probability of a transaction occurring within the spread and the autocorrelation between successive price changes is higher in option trading times, but this deterioration in quotes is not accompanied by an increase in adverse selection or inventory costs and needs further investigation.
Author: Joel Hasbrouck
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209
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Book Description
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
Author: Larry Harris
Publisher: OUP USA
ISBN: 9780195144703
Category : Business & Economics
Languages : en
Pages : 664
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Book Description
Focusing on market microstructure, Harris (chief economist, U.S. Securities and Exchange Commission) introduces the practices and regulations governing stock trading markets. Writing to be understandable to the lay reader, he examines the structure of trading, puts forward an economic theory of trading, discusses speculative trading strategies, explores liquidity and volatility, and considers the evaluation of trader performance. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).
Author: Jeff Augen
Publisher: FT Press
ISBN: 0132703688
Category : Business & Economics
Languages : en
Pages : 301
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Book Description
“Jeff’s analysis is unique, at least among academic derivatives textbooks. I would definitely use this material in my derivatives class, as I believe students would benefit from analyzing the many dimensions of Jeff’s trading strategies. I especially found the material on trading the earnings cycle and discussion of how to insure against price jumps at known events very worthwhile.” —DR. ROBERT JENNINGS, Professor of Finance, Indiana University Kelley School of Business “This is not just another book about options trading. The author shares a plethora of knowledge based on 20 years of trading experience and study of the financial markets. Jeff explains the myriad of complexities about options in a manner that is insightful and easy to understand. Given the growth in the options and derivatives markets over the past five years, this book is required reading for any serious investor or anyone in the financial service industries.” —MICHAEL P. O’HARE, Head of Mergers & Acquisitions, Oppenheimer & Co. Inc. “Those in the know will find this book to be an excellent resource and practical guide with exciting new insights into investing and hedging with options.” —JIM MEYER, Managing Director, Sasqua Field Capital Partners LLC “Jeff has focused everything I knew about options pricing and more through a hyper-insightful lens! This book provides a unique and practical perspective about options trading that should be required reading for professional and individual investors.” —ARTHUR TISI, Founder and CEO, EXA Infosystems; private investor and options trader In The Volatility Edge in Options Trading, leading options trader Jeff Augen introduces breakthrough strategies for identifying subtle price distortions that arise from changes in market volatility. Drawing on more than a decade of never-before-published research, Augen provides new analytical techniques that every experienced options trader can use to study historical price changes, mitigate risk, limit market exposure, and structure mathematically sound high-return options positions. Augen bridges the gap between pricing theory mathematics and market realities, covering topics addressed in no other options trading book. He introduces new ways to exploit the rising volatility that precedes earnings releases; trade the monthly options expiration cycle; leverage put:call price parity disruptions; understand weekend and month-end effects on bid-ask spreads; and use options on the CBOE Volatility Index (VIX) as a portfolio hedge. Unlike conventional guides, The Volatility Edge in Options Trading doesn’t rely on oversimplified positional analyses: it fully reflects ongoing changes in the prices of underlying securities, market volatility, and time decay. What’s more, Augen shows how to build your own customized analytical toolset using low-cost desktop software and data sources: tools that can transform his state-of-the-art strategies into practical buy/sell guidance. An options investment strategy that reflects the markets’ fundamental mathematical properties Presents strategies for achieving superior returns in widely diverse market conditions Adaptive trading: how to dynamically manage option positions, and why you must Includes precise, proven metrics and rules for adjusting complex positions Effectively trading the earnings and expiration cycles Leverage price distortions related to earnings and impending options expirations Building a state-of-the-art analytical infrastructure Use standard desktop software and data sources to build world-class decision-making tools
Author: Joseph A. Cherian
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 42
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Book Description
Author: Vinay Kumar Apparaju
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The theory of options pricing portends that option prices are derived from the underlying asset prices and their price can only be discovered after the price of the underlying asset is known in the frictionless market. The frictions like information asymmetry would mean that the informed could either trade their information in options market or in stock markets. In such a situation, the options market would send cues for the stock market. The major theoretical contention is, therefore, do the underlying asset prices have information for the price discovery of options? On the contrary, do options prices have information for the underlying asset? These questions are previously researched and apparently compelling evidence is found on both sides of the divide. Besides, the lead-lag relationships between both markets are of immense significance given the participants' ability to garner private information and find suitable avenues for investing. Therefore, it is only germane to research this question. The present paper attempts to explore the micro-structural linkages in terms of information links, inventory-based links and hedging-based links between options markets and stock markets by putting all the arguments in perspective with an emerging market context. The results of the present study suggest that the options markets in India have information for stock market, while stock market has little information for options market. The present study finds evidence that support hedging-based links between the options and stock market, while the results are weak for inventory control.
Author: United States. Securities and Exchange Commission. Special Study of the Options Markets
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 1128
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Book Description
Author: Kin Keung Lai
Publisher: Routledge
ISBN: 1135006989
Category : Business & Economics
Languages : en
Pages : 113
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Book Description
This book provides different financial models based on options to predict underlying asset price and design the risk hedging strategies. Authors of the book have made theoretical innovation to these models to enable the models to be applicable to real market. The book also introduces risk management and hedging strategies based on different criterions. These strategies provide practical guide for real option trading. This book studies the classical stochastic volatility and deterministic volatility models. For the former, the classical Heston model is integrated with volatility term structure. The correlation of Heston model is considered to be variable. For the latter, the local volatility model is improved from experience of financial practice. The improved local volatility surface is then used for price forecasting. VaR and CVaR are employed as standard criterions for risk management. The options trading strategies are also designed combining different types of options and they have been proven to be profitable in real market. This book is a combination of theory and practice. Users will find the applications of these financial models in real market to be effective and efficient.
Author: Mondher Bellalah
Publisher: World Scientific
ISBN: 981447441X
Category : Business & Economics
Languages : en
Pages : 645
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Book Description
This book provides a comprehensive discussion of the issues related to risk, volatility, value and risk management. It includes a selection of the best papers presented at the Fourth International Finance Conference 2007, qualified by Professor James Heckman, the 2000 Nobel Prize Laureate in Economics, as a “high level” one. The first half of the book examines ways to manage risk and compute value-at-risk for exchange risk associated to debt portfolios and portfolios of equity. It also covers the Basel II framework implementation and securitisation. The effects of volatility and risk on the valuation of financial assets are further studied in detail.The second half of the book is dedicated to the banking industry, banking competition on the credit market, banking risk and distress, market valuation, managerial risk taking, and value in the ICT activity. With its inclusion of new concepts and recent literature, academics and risk managers will want to read this book.
Author: Richard Lehman
Publisher: John Wiley & Sons
ISBN: 1118022262
Category : Business & Economics
Languages : en
Pages : 224
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Book Description
Practical option strategies for the new post-crisis financial market Traditional buy-and-hold investing has been seriously challenged in the wake of the recent financial crisis. With economic and market uncertainty at a very high level, options are still the most effective tool available for managing volatility and downside risk, yet they remain widely underutilized by individuals and investment managers. In Options for Volatile Markets, Richard Lehman and Lawrence McMillan provide you with specific strategies to lower portfolio volatility, bulletproof your portfolio against any catastrophe, and tailor your investments to the precise level of risk you are comfortable with. While the core strategy of this new edition remains covered call writing, the authors expand into more comprehensive option strategies that offer deeper downside protection or even allow investors to capitalize on market or individual stock volatility. In addition, they discuss new offerings like weekly expirations and options on ETFs. For investors who are looking to capitalize on global investment opportunities but are fearful of lurking "black swans", this book shows how ETFs and options can be utilized to construct portfolios that are continuously protected against unforeseen calamities. A complete guide to the increased control and lowered risk covered call writing offers active investors and traders Addresses the changing investment environment and how to use options to succeed within it Explains how to use options with exchange-traded funds Understanding options is now more important than ever, and with Options for Volatile Markets as your guide, you'll quickly learn how to use them to protect your portfolio as well as improve its overall performance.
