Intraday information from S&P 500 index futures options

• Main Authors: LIM, Kian Guan, YING, Chen, YAP, Kian Leong Nelson
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Intraday Options trading; Market Efficiency; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6403; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7402/viewcontent/____Intraday_information_from_S_P_500_Index_Futures_Options.pdf
• Institution: Singapore Management University

In this paper we employ intraday transaction prices of liquid E-mini S&P 500 index futuresoptions to form 10-minutes ahead risk-neutral skewness forecasts and show profitable optionstrading strategy net of transaction costs. We do not find profitable trading based on 10-minutesahead risk-neutral volatility and only very marginal cases of profitable trading using kurtosisforecasts. The skewness profitability anomaly may be an indication of informational marketinefficiency in intraday S&P 500 futures options markets, which is contrary to findings usinglonger-span daily and weekly moments. Our results lend credence to the persistence of intradaytrading activities in the markets.