Time Spreads in China SSE 50 Options

Authors

  •   Ronald T. Slivka Adjunct Professor, Department of Finance and Risk Engineering, New York University – Tandon School of Engineering, 1 Metrotech Center, 10th Fl, Brooklyn, NY 11201
  •   Ruichen Wang MSc Student – Financial Engineering, Department of Finance and Risk Engineering, New York University – Tandon School of Engineering, 1 Metrotech Center, 10th Fl., Brooklyn, NY 11201

DOI:

https://doi.org/10.17010/ijrcm/2019/v6/i4/150268

Keywords:

SSE 50 Options

, Time Spreads, Calendar Spreads, Horizontal Spreads.

JEL Classification

, G10, G11, G13, G14, G15.

Paper Submission Date

, November 1, 2019, Paper Sent Back for Revision, November 15, Paper Acceptance Date, December 1, 2019.

Abstract

Using day-end pricing data from a comprehensive database not readily available outside of China, an algorithm to trade near-the-money call option time spreads on China’s SSE 50 ETF was developed and tested. Analysis of in-sample data suggested profitable trading rules that, when applied to limited out-of-sample data, failed to produce superior similar results. A likely explanation for this was offered and further testing was planned. To our knowledge, there are no known related studies of SSE 50 option time spreads; so, this work provides a helpful addition to the growing knowledge about the developing China market.

Downloads

Download data is not yet available.

Author Biography

Ronald T. Slivka, Adjunct Professor, Department of Finance and Risk Engineering, New York University – Tandon School of Engineering, 1 Metrotech Center, 10th Fl, Brooklyn, NY 11201

ORCID ID : 0000-0002-8195-6850

Downloads

Published

2019-12-31

How to Cite

Slivka, R. T., & Wang, R. (2019). Time Spreads in China SSE 50 Options. Indian Journal of Research in Capital Markets, 6(4), 7–19. https://doi.org/10.17010/ijrcm/2019/v6/i4/150268

Issue

Volume 6, Issue 4, October-December 2019

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

Cretien, P. D. (2012, January 1). Eurodollar options : Interest rate forecasts and calendar spreads. Futures Magazine, pp. 28, 29, 33.

Cretien, P. D. (2013, April 1). Seize the day with forex calendar spreads. Futures Magazine, pp. 20, 21, 27.

Hilliard, J. E., & Xhang, H. (2017). Regulator's soft interventions and limits on arbitrage in the Chinese option market. Auburn Alabama : Auburn University.

Koshiyama, A. S., Firoozye, N., & Treleaven, P. (2019). A derivatives trading recommendation system: The mid-curve calendar spread case. Intelligent Systems in Accounting, Finance & Management, 26 (2), 83-103.

Parkinson, M. (1980). The extreme value method for estimating of the rate of return. The Journal of Business, 53 (1), 61-65.

Schneider, L., & Tavin, B. (2018). From the Samuelson volatility effect to a Samuelson correlation effect : An analysis of crude oil calendar spread options. Journal of Banking and Finance, 95, 185–202.

Seok, J. B., Brorsen, B. W., & Niyibizi, B. (2018). Modeling calendar spread options. Agricultural Finance Review, 78 (5), 551-570.

Statistics How To. (n.d.). Statistics definitions - Chauvenet’s Criterion. Retrieved from https://www.statisticshowto.datasciencecentral.com/chauvenets-criterion/

Tongtong, X., Susheng, W., Ke, P., Dandan, Y., & Mingzhu, H. (2017). Intraday trading patterns in the SSE50 ETF option. 3rd International Conference on Economics, Social Science, Arts, Education and Management Engineering (pp. 1793-1797). Huhhot, China : Atlantis Press.

Chauvenet's Criterion. (n.d.). In, Wikipedia. Retrieved December 20, 2019 from https://en.wikipedia.org/wiki/Chauvenet%27s_criterion

Pan, H., & Song, J. (2017). Volatility cones and volatility arbitrage strategies - Empirical study based on SSE ETF option. China Finance Review International, 7( 2), 203-227.

Yang, D., & Zhang, Q. (2000). Drift-independent volatility estimation based on high, low, open and close prices. Journal of Business, 73 (3), 477-491.