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research article

Does information drive trading in option strategies?

Fahlenbrach, R.  
•
Sandås, P.
2010
Journal of Banking and Finance

We study trading in option strategies in the FTSE-100 index market. Trades in option strategies represent around 37% of the total number of trades and over 75% of the total trading volume in our sample. We find some evidence that order flow in volatility-sensitive option strategies contains information about future realized volatility. We do not find evidence that order flow in directionally-sensitive option strategies contains information about future returns. Overall, our evidence suggests that option strategies are used both by traders who possess non-public information about future volatility and by uninformed speculators who appear to follow unprofitable trend chasing strategies. © 2010 Elsevier B.V.

  • Details
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Type
research article
DOI
10.1016/j.jbankfin.2010.02.027
Web of Science ID

WOS:000281020900006

Author(s)
Fahlenbrach, R.  
Sandås, P.
Date Issued

2010

Publisher

Elsevier

Published in
Journal of Banking and Finance
Volume

34

Issue

10

Start page

2370

End page

2385

Subjects

Option strategies

•

Option spreads

•

Option combinations

•

Volatility trading

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
SFI-RF  
Available on Infoscience
October 27, 2010
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/56196
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