OPTION TRADING STRATEGIES, PART 1

Motivation: The finance and academic industries are highly discussed in the stock market trading domain. The increase in economic globalization shows the connection among stock markets in different countries, which produces the effect of risk conduction in the market. Forecasting the direction of every day’s stock market return is important and challenging. The growing complexity and dynamic features in stock markets are difficult in the financial industry. The inflexible trading method developed by financial practitioners utilized a larger amount of stock market features and is failed to achieve a satisfactory result in every condition of the market. Further, the existing data mining approaches are incomplete and inefficient. Aim: To overcome the issues in stock and problem of existing methods, proposed option trading strategies for rebalancing Exchange Traded Fund (ETF) in the stock market. Rebalancing-ETF measure the volatility of the stock to track the error of model and rebalance the threshold quality to improve the trade. The proposed method increases the order of threshold quantity to rebalance the trade. Results: The result showed that the minimum orders increases in rebalancing trade, which reduces the impact of price formations in market. The tracking error occurs when the larger quantity of threshold value reduces the quantity. Then, the markets are changed significantly when the Net Asset Values (NAV) of rebalancing ETF increases.

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OPTION TRADING STRATEGIES, PART 2

Derivatives Markets ◽

10.4324/9781315689241-12 ◽

2016 ◽

pp. 415-434

Keyword(s):

Trading Strategies ◽

Option Trading

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A Study of the Performance of Option Strategy Benchmark Index in Global Option Markets

Korean Journal of Financial Studies ◽

10.26845/kjfs.2021.08.50.4.439 ◽

2021 ◽

Vol 50 (4) ◽

pp. 439-472

Author(s):

Byung Jin Kang ◽

Cheoljun Eom ◽

Woo Baik Lee ◽

Uk Chang ◽

Jong Won Park

Keyword(s):

Emerging Markets ◽

Trading Strategies ◽

Options Markets ◽

Option Markets ◽

Option Trading ◽

Significant Difference ◽

Sample Data ◽

Covered Call ◽

Almost All ◽

The Empirical Analysis

While most previous studies have analyzed the performance of the Option Strategy Benchmark Index (SBI) in a specific market such as S&P500 and KOSPI200, this study comprehensively investigates the performance of the option SBIs in nine global options markets in Europe, Asia, and Oceania. In the empirical analysis using the sample data from September 2008 to April 2019, the main results of this study are as follows. First, most of the option SBIs generally provide better performance than the simple buy-and-hold strategy, which is mainly due to a reduction in risk rather than improvement in returns. Second, the option SBIs based on straddle or protective put, one of the most popular option trading strategies, perform poorly in almost all markets, whereas the option SBIs based on covered call or (cash) covered put show relatively good performance. Finally, there is no significant difference in the performance of the option SBIs between markets in the same region or those with a similar level of development. However, we found significant differences in the performance of the option SBIs between Europe and Asia and developed and emerging markets.

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