The information content of the volatility index options trading volume

2021 ◽  
Author(s):  
Chen Gu ◽  
Xu Guo ◽  
Alexander Kurov ◽  
Raluca Stan
Keyword(s):  
Information Content ◽  
Trading Volume ◽  
Index Options ◽  
Volatility Index ◽  
Options Trading

The Information Content of the VIX Options Trading Volume

2021 ◽  
Author(s):  
Chen Gu ◽  
Xu Guo ◽  
Alexander Kurov ◽  
Raluca Stan
Keyword(s):  
Information Content ◽  
Trading Volume ◽  
Vix Options ◽  
Options Trading

scholarly journals Options trading strategy based on ARIMA forecasting

2020 ◽  
Vol 4 (2) ◽  
pp. 111-127
Author(s):  
Pierre Rostan ◽  
Alexandra Rostan ◽  
Mohammad Nurunnabi
Keyword(s):  
Composite Index ◽  
Garch Model ◽  
Trading Strategy ◽  
Credit Crisis ◽  
Strike Price ◽  
Index Options ◽  
Content Type ◽  
Option Trading ◽  
Auto Regressive ◽  
Options Trading

Purpose The purpose of this paper is to illustrate a profitable and original index options trading strategy. Design/methodology/approach The methodology is based on auto regressive integrated moving average (ARIMA) forecasting of the S&P 500 index and the strategy is tested on a large database of S&P 500 Composite index options and benchmarked to the generalized auto regressive conditional heteroscedastic (GARCH) model. The forecasts validate a set of criteria as follows: the first criterion checks if the forecasted index is greater or lower than the option strike price and the second criterion if the option premium is underpriced or overpriced. A buy or sell and hold strategy is finally implemented. Findings The paper demonstrates the valuable contribution of this option trading strategy when trading call and put index options. It especially demonstrates that the ARIMA forecasting method is a valid method for forecasting the S&P 500 Composite index and is superior to the GARCH model in the context of an application to index options trading. Originality/value The strategy was applied in the aftermath of the 2008 credit crisis over 60 months when the volatility index (VIX) was experiencing a downtrend. The strategy was successful with puts and calls traded on the USA market. The strategy may have a different outcome in a different economic and regional context.

scholarly journals Predictability of OTC Option Volatility for Future Stock Volatility

2020 ◽  
Vol 12 (12) ◽  
pp. 5200
Author(s):  
Jungmu Kim ◽  
Yuen Jung Park
Keyword(s):  
Information Content ◽  
Unbiased Estimator ◽  
Implied Volatility ◽  
Realized Volatility ◽  
Stock Index ◽  
Options Market ◽  
Over The Counter ◽  
Index Options ◽  
Stock Volatility ◽  
Future Realized Volatility

This study explores the information content of the implied volatility inferred from stock index options in the over-the-counter (OTC) market, which has rarely been studied in the literature. Using OTC calls, puts, and straddles on the KOSPI 200 index, we find that implied volatility generally outperforms historical volatility in predicting future realized volatility, although it is not an unbiased estimator. The results are more apparent for options with shorter maturity. However, while implied volatility has strong predictability during normal periods, historical volatility is superior to implied volatility during a period of crisis due to the liquidity contraction of the OTC options market. This finding suggests that the OTC options market can play a role in conveying important information to predict future volatility.

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