Options Trading and its Predictive Power on Short-Term Stock Market Movements
Master thesis
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https://hdl.handle.net/11250/3159847Utgivelsesdato
2024Metadata
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- Master of Science [1822]
Sammendrag
Investigating options trading from 2021-2023, we find that the predictive power of the options market on the underlying stock market has changed relative to previous studies. Prior studies examine market data from 1995-2010, before the introduction of short-term options and the rise of retail options trading. We find, in contrast to previous studies, that call options are more statistically significant predictors of share price movements than put options. Moreover, we find that heightened call options trading predicts negative next-day returns, while heightened put options trading predicts positive returns, contrary to common intuition. These relationships change across different years and market structures but are consistent in the direction of their prediction. Additionally, we find no evidence that option traders within the longer dated options market are more sophisticated than traders in the shorted dated options market.
Beskrivelse
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2024