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The impact of execution delay on the profitability of put‐call‐futures trading strategies—Evidence from Taiwan

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  • Jong‐Rong Chiou
  • Wen‐Liang Gideon Hsieh
  • Yuan‐Yi Lin

Abstract

This study examines the impact of execution delay on the profitability of put‐call‐futures quasi‐arbitrage strategies using trade and quote data in the Taiwanese market. Assuming order execution at the next immediate price following a mispricing signal, the execution of individual components is traced and a substantial delay resulting from the late execution of an option is reported. A fill‐or‐kill strategy that directly restricts such a delay is unsatisfactory because unwinding already acquired positions involves added transaction costs. Ex ante performance is significantly improved for combined strategies that execute the less liquid asset first, while shortening the time before acquisition of the first position. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:361–385, 2007

Suggested Citation

  • Jong‐Rong Chiou & Wen‐Liang Gideon Hsieh & Yuan‐Yi Lin, 2007. "The impact of execution delay on the profitability of put‐call‐futures trading strategies—Evidence from Taiwan," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 27(4), pages 361-385, April.
    • Handle: RePEc:wly:jfutmk:v:27:y:2007:i:4:p:361-385
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    Cited by:

    1. Tu, Anthony H. & Hsieh, Wen-Liang G. & Wu, Wei-Shao, 2016. "Market uncertainty, expected volatility and the mispricing of S&P 500 index futures," Journal of Empirical Finance, Elsevier, vol. 35(C), pages 78-98.
    2. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.

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