The Informational Role of Stock and Option Volume

Chan, Kalok; Chung, Y. Peter; Fong, Wai Ming

doi:10.2139/ssrn.170356

Cited by 113 publications

(125 citation statements)

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“…His model provides a framework for analyzing dynamic interrelations between returns and signed volumes in transaction time. Chan, Chung and Fong (2002) extend Hasbrouck's model to multiple markets, and base the analyses on the calendar clock rather than the transaction clock. 10 We use the calendar clock specification and consider a calendar spread with positions in the nearby futures contract and the second nearby contract.…”

Section: Spread Trades: Information or Speculation?mentioning

confidence: 99%

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VIX Futures Calendar Spreads

Hou

Nordén

2017

SSRN Journal

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A VIX futures calendar spread involves buying a futures contract maturing in one month and selling another one maturing in a different month. VIX futures calendar spreads represent a daily turnover above 500 million dollars, or roughly 20% of the total VIX futures trading volume. A calendar spread trade is a bet on the change in the slope of the volatility term structure. We find that speculation, rather than information about changes in the slope of the volatility term structure, is driving calendar spread trades. On average, a calendar spread costs a little less than $100 (about 15 basis points). If settled at the end of the trading day, 43% of the calendar spreads are profitable.* Ai Jun Hou and Lars L. Nordén are grateful to the Jan Wallander and Tom Hedelius foundation and the Tore Browaldh foundation for research support. We thank Björn Hagströmer and Caihong Xu for valuable comments and suggestions.

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Section: Spread Trades: Information or Speculation?mentioning

confidence: 99%

“…The VAR model specified in equations (1) and (2) We follow Chan, Chung and Fong (2002) and divide each VIX futures trading day into 99…”

Section: Spread Trades: Information or Speculation?mentioning

confidence: 99%

VIX Futures Calendar Spreads

Hou

Nordén

2017

SSRN Journal

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“…On the other hand, Chan, Chung and Fong (2002), also using trade and quote data for 14 firms for the first quarter of 1995, calculate signed volume and quote-midpoint returns for five-minute intervals. In order to examine the dynamics of price movements and order flows for stocks and their options, they specify a vector autoregression of stock returns, call option returns, put option returns, stock signed volume, call option signed volume, and put option signed volume.…”

Section: The Information In Option Volume For Stock Pricesmentioning

confidence: 99%

How Option Markets Affect Price Discovery on the Spot Markets: A Survey of the Empirical Literature and Synthesis

Ansi

Ouda

2009

IJBM

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The aim of this paper is to survey a wide range of empirical papers on option markets to address the extent to which option markets affect price discovery on the spot market. The theoretical prediction that informed traders should sometimes trade in the option market has been examined empirically by several authors. The existing empirical evidence for such a view, however, is mixed. One group of researchers support the hypothesis that information reflects in option market first and find a significant lead for the option market. Another group of researchers support the hypothesis that information reflects in stock markets first and trading activities in option markets are not significant. Since there is no consensus among the empirical studies on this issue, it leaves us with some open theoretical and empirical issues.

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“…Hagelin 3 looked for the information contained in the volume of options traded in Sweden and investigated the relationship between option market activity and cash market volatility on the OMX index. Chan et al 4 studied the intra-day interdependence between New York Stock Exchange stocks and their Chicago Board Options Exchange (CBOE) traded options. Lamont and Stein 5 mentioned the relationship between the ratio of put-to-call volume and market valuation, while Chakravarty et al 6 found informed trading in stock and option markets.…”

Section: The Literaturementioning

confidence: 99%

Information embedded in the trading volume of currency options

Machnes

2006

Deriv Use Trading regul

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This paper expands on the existing literature about the predictive power of the trading volume of options for the future spot price of assets. It presents an empirical examination of the relationship between the trading volume of options for the Canadian dollar, the Swiss franc and the British pound and their exchange rates against the US dollar, 17 h after regular trading hours in Chicago. Except for the Canadian dollar, an additional day of trade distorts these relationships. At the same time, the exchange rate of the Japanese yen was less related to the options' volume of trade. It is seen that different currencies, which are traded in their homeland during different regular trading hours, are accordingly related to the options trading volume in Chicago.

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The Informational Role of Stock and Option Volume

Cited by 113 publications

References 50 publications

VIX Futures Calendar Spreads

VIX Futures Calendar Spreads

How Option Markets Affect Price Discovery on the Spot Markets: A Survey of the Empirical Literature and Synthesis

Information embedded in the trading volume of currency options

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