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Do Option Strategy Traders Have a Disadvantage? Evidence from the Australian Options Market

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  • Anthony Flint
  • Andrew Lepone
  • Jin Young Yang

Abstract

This study measures the magnitude of execution costs of outright options and options which constitute strategies (“strategy‐linked options”), and examines if any differences in execution costs between these two groups is attributable to differences in market making costs on the Australian Options Market. Results reveal that execution costs for tailor‐made strategy‐linked options are greater than outright options. Also, this study provides evidence that the disadvantage of tailor‐made strategy‐linked options over outright options is driven by market makers' hedging costs. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:838–852, 2014

Suggested Citation

  • Anthony Flint & Andrew Lepone & Jin Young Yang, 2014. "Do Option Strategy Traders Have a Disadvantage? Evidence from the Australian Options Market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 34(9), pages 838-852, September.
    • Handle: RePEc:wly:jfutmk:v:34:y:2014:i:9:p:838-852
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    1. Alejandro Bernales & Thanos Verousis & Nikolaos Voukelatos & Mengyu Zhang, 2020. "What do we know about individual equity options?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 67-91, January.

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