TY - CHAP
T1 - Forecasting Option Spreads: The Use of Multiple Listing
AU - Abraham, Rebecca
AU - Harrington, Charlie W.
PY - 2008/1/1
Y1 - 2008/1/1
N2 - We propose a novel method of forecasting equity option spreads using the degree of multiple listing as a proxy for expectations of future spreads. Spreads are a transactions fee for traders. To determine the future spreads on options being considered for purchase, traders must take current market trends affecting spreads into account. One such trend is the continued decline in spreads due to the multiple listing of options. Options listed on 4-6 exchanges compete more intensely than those listed on fewer exchanges, so that they may be expected to experience greater future declines in spreads. This study identifies the listing dates and number of listed exchanges for options listed on up to six exchanges as of May 2005. Listing criteria for multiple listing are defined with short- And long-term volumes, market capitalization, net income, and total assets being significant determinants of multiple listing. Short- And long-term volumes were found to have no explanatory power for multiple listing. Ranges of listing criteria are specified so that traders may locate the options of their choice.
AB - We propose a novel method of forecasting equity option spreads using the degree of multiple listing as a proxy for expectations of future spreads. Spreads are a transactions fee for traders. To determine the future spreads on options being considered for purchase, traders must take current market trends affecting spreads into account. One such trend is the continued decline in spreads due to the multiple listing of options. Options listed on 4-6 exchanges compete more intensely than those listed on fewer exchanges, so that they may be expected to experience greater future declines in spreads. This study identifies the listing dates and number of listed exchanges for options listed on up to six exchanges as of May 2005. Listing criteria for multiple listing are defined with short- And long-term volumes, market capitalization, net income, and total assets being significant determinants of multiple listing. Short- And long-term volumes were found to have no explanatory power for multiple listing. Ranges of listing criteria are specified so that traders may locate the options of their choice.
KW - Business forecasting
UR - https://nsuworks.nova.edu/hcbe_facbooks/180
U2 - 10.1016/s1477-4070(07)00203-6
DO - 10.1016/s1477-4070(07)00203-6
M3 - Chapter
VL - 5
T3 - Advances in Business and Management Forecasting
SP - 47
EP - 63
BT - Advances in Business and Management Forecasting, Volume 5
ER -