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Option volume and stock price behavior: Some evidence from the Chicago board options exchange

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  • Michael Boluch
  • Trevor Chamberlain

Abstract

This study examines the relationship between selected Chicago Board Options Exchange option volume and underlying stock prices using intraday data for the period January 3, 1989 to January 31, 1989. The data were prefiltered and aggregated into 15-minute intervals. Causality tests were performed using Granger's method. The test results indicate that the option volume-stock price relationship is largely characterized by feedback, with option volume causing stock price changes and vice versa. The evidence also suggests that the relationship only persists for very short time periods, with little or no opportunity for market participants to devise profitable trading strategies utilizing one market's information in the other market. Copyright International Atlantic Economic Society 1997

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  • Michael Boluch & Trevor Chamberlain, 1997. "Option volume and stock price behavior: Some evidence from the Chicago board options exchange," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(4), pages 358-370, December.
    • Handle: RePEc:kap:atlecj:v:25:y:1997:i:4:p:358-370
    DOI: 10.1007/BF02298346
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    References listed on IDEAS

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    Cited by:

    1. Ho, Kin-Yip & Zheng, Lin & Zhang, Zhaoyong, 2012. "Volume, volatility and information linkages in the stock and option markets," Review of Financial Economics, Elsevier, vol. 21(4), pages 168-174.
    2. Martín Saldías & Rafael Barbosa, 2013. "Option trade volume and volatility of banks’ stock returns," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    3. Lee, Mingchih & Chen, Chun-Da, 2005. "The intraday behaviors and relationships with its underlying assets: evidence on option market in Taiwan," International Review of Financial Analysis, Elsevier, vol. 14(5), pages 587-603.

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