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Is there an intraday reversal effect in commodity futures and options? Evidence from the Chinese market

Author

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  • Zheng, Luyuan
  • Luo, Xingguo

Abstract

Based on the high-frequency data of China's commodity futures and options markets from 2017 to 2022, this article examines the intraday effect of China's commodity futures and options. The research of this article found that China's commodity futures and options have significant intraday reversal effects, and the overnight opening factor and intraday momentum factor are more significant. In addition, this article tests the cross-predictive ability of futures and options. The tests found that futures have a strong cross-predictive ability for options, while the cross-predictive ability of options to futures is weak. In response to this phenomenon, several tests are conducted. We consider the market makers' Gamma Hedge behavior, Vega Hedge behavior, and liquidity as factors. Our novel evidence indicates that all these aforementioned are related to the intraday reversal effect in the Chinese market.

Suggested Citation

  • Zheng, Luyuan & Luo, Xingguo, 2024. "Is there an intraday reversal effect in commodity futures and options? Evidence from the Chinese market," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:pacfin:v:88:y:2024:i:c:s0927538x24002865
    DOI: 10.1016/j.pacfin.2024.102534
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    2. Ma, Gaoping & Bouri, Elie & Xu, Yahua & Zhou, Z. Ivy, 2025. "The “night effect” of intraday trading: Evidence from Chinese gold and silver futures markets," Global Finance Journal, Elsevier, vol. 64(C).

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