IDEAS home Printed from https://ideas.repec.org/a/icf/icfjfe/v08y2010i3p49-61.html
   My bibliography  Save this article

Informational Role of Options Open Interests and Volume in Forecasting Future Prices: A Study on Indian Market

Author

Listed:
  • Rajesh Pathak
  • Nikhil Rastogi

Abstract

This study investigates the informational role of options open interests and volume in predicting the future stock prices in Indian market. Most of the time, the uninformed traders lose to informed traders because they neither have private information nor the sophisticated knowledge to process the publicly available information. The most closely watched data are also the least informative. This study is an attempt to find out if the daily published and publicly available options data are informative and can be used to forecast the future stock price at maturity. Then the retail traders and investors will be able to minimize their loss to informed traders and enhance their portfolio performance. The sample of this study is 17 highly traded Nifty 50 index stocks from different sectors having significant share in the index. Predictors based on options price and options volume have been estimated, following Bhuyan and Williams (2004), and then used in the regression model as predictor variables of price at maturity both jointly and in isolation. The period of study covers stock options contract of three months (July-September 2009). Only near month contract is considered for the study because of liquidity concern. The coefficients of predictors are found to be significant and not statistically different across the study period. Consistent with the results of the previous studies, the results show that options open interest and volume are relevant in forecasting future prices.

Suggested Citation

  • Rajesh Pathak & Nikhil Rastogi, 2010. "Informational Role of Options Open Interests and Volume in Forecasting Future Prices: A Study on Indian Market," The IUP Journal of Financial Economics, IUP Publications, vol. 0(3), pages 49-61, September.
    • Handle: RePEc:icf:icfjfe:v:08:y:2010:i:3:p:49-61
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Avinash & T. Mallikarjunappa, 2020. "Informational Role of Open Interest and Transaction Volume of Options: A Meta-Analytic Review," FIIB Business Review, , vol. 9(4), pages 275-285, December.
    2. Rajesh Pathak & Kaushik Bhattacharjee & Nagi Reddy V., 2015. "Information Content of Derivatives under Varying Market Conditions and Moneyness: The Case of S&P CNX Nifty Index Options," Global Business Review, International Management Institute, vol. 16(2), pages 281-302, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjfe:v:08:y:2010:i:3:p:49-61. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: G R K Murty (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.