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Block trades in options markets

Author

Listed:
  • Eleni Gousgounis
  • Sayee Srinivasan

Abstract

Block trading, which was sparse before the reduction of the minimum permissible block size threshold in October 2012, currently accounts for about 30% of the trading volume in WTI crude oil options. Block orders share similar characteristics to those routed at the pit, but they have lower information content and face higher execution costs, due to high search costs. However, our results show that such block orders would have been costlier to execute at the pit, which suggests that some pit order flow may have migrated to the upstairs market, contributing to the eventual demise of energy options pits.

Suggested Citation

  • Eleni Gousgounis & Sayee Srinivasan, 2019. "Block trades in options markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(8), pages 985-1007, August.
    • Handle: RePEc:wly:jfutmk:v:39:y:2019:i:8:p:985-1007
    DOI: 10.1002/fut.22014
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    References listed on IDEAS

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