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The intraday behaviour of bid-ask spreads, returns and volatility for FTSE 100 stock index options

The intraday behaviour of bid-ask spreads, returns and volatility for FTSE 100 stock index options
The intraday behaviour of bid-ask spreads, returns and volatility for FTSE 100 stock index options
The microstructure of stock markets and futures markets has attracted considerable recent attention, but the evidence relating to options markets is sparse, especially for the U.K. This article addresses this void in the literature by presenting evidence on the intraday behavior of bid-ask spreads, returns, volatility, and volume. Both clear differences and similarities are found with the previous results for other markets. Spreads are found to be wide near the market open and narrow near the close. Although this contrasts with some previous evidence in U.S. stock and futures markets of a U-shaped pattern in intraday spreads, it is consistent with other recent research, and the differences may be explained by differing market structures. No clear pattern emerges in options returns, but there is a U-shape across the day in returns volatility and in volume. The results help to differentiate between the competing theories of the intraday behavior of these key variables
1074-1240
20-32
Ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
Buckle, Mike
ed97238b-d81d-4a09-883a-312d8dd43796
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca
Ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
Buckle, Mike
ed97238b-d81d-4a09-883a-312d8dd43796
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca

Ap Gwilym, Owain, Buckle, Mike and Thomas, Stephen (1997) The intraday behaviour of bid-ask spreads, returns and volatility for FTSE 100 stock index options. Journal of Derivatives, 4 (4), 20-32.

Record type: Article

Abstract

The microstructure of stock markets and futures markets has attracted considerable recent attention, but the evidence relating to options markets is sparse, especially for the U.K. This article addresses this void in the literature by presenting evidence on the intraday behavior of bid-ask spreads, returns, volatility, and volume. Both clear differences and similarities are found with the previous results for other markets. Spreads are found to be wide near the market open and narrow near the close. Although this contrasts with some previous evidence in U.S. stock and futures markets of a U-shaped pattern in intraday spreads, it is consistent with other recent research, and the differences may be explained by differing market structures. No clear pattern emerges in options returns, but there is a U-shape across the day in returns volatility and in volume. The results help to differentiate between the competing theories of the intraday behavior of these key variables

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More information

Published date: 1997
Additional Information: Summer 1997

Identifiers

Local EPrints ID: 37372
URI: http://eprints.soton.ac.uk/id/eprint/37372
ISSN: 1074-1240
PURE UUID: 16cc67f1-dbad-45f7-a3a1-f723e27c2fc6

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Date deposited: 30 Apr 2007
Last modified: 08 Jan 2022 09:57

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Contributors

Author: Owain Ap Gwilym
Author: Mike Buckle
Author: Stephen Thomas

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