A Detection of Mispricing in Chinese Option Market

Abstract

As a new market in 2015, the Chinese options market has the characteristics of information asymmetry. Therefore, searching for a general investment pattern is important. This article analyzes all Chinese stock index options data and reveals the statistical law of the calendar effect in the option market. The article conducts regression analysis on unreasonable volatility, building delta hedge and straddle option strategies, and using regression analysis on options yield to verify that the market makers neglect the influence of the difference between expiration date and purchase date. The pricing difference caused by the calendar effect of options does exist, but unlike the US options market, investors cannot just use simple strategies to obtain a robust positive return in the Chinese market through the calendar effect.