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The Information Content of Trading Activity and Quote Changes: Evidence from VIX Options

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  • Wei‐Che Tsai
  • Ying‐Tzu Chiu
  • Yaw‐Huei Wang

Abstract

We investigate the informational role of trading volume and quote changes in VIX options with regard to future movements in the index, based upon a high‐frequency framework. Our results reveal that whilst volume imbalances convey no significant predictive information, quote changes in VIX options can significantly predict changes in the index, with this predictive power being more pronounced for VIX calls around monetary policy announcement periods. Our findings imply that when acting on market‐wide information, traders in VIX options may prefer to submit limit orders, as opposed to market orders, leading to such information being contained in the quote changes. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 35:715–737, 2015

Suggested Citation

  • Wei‐Che Tsai & Ying‐Tzu Chiu & Yaw‐Huei Wang, 2015. "The Information Content of Trading Activity and Quote Changes: Evidence from VIX Options," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(8), pages 715-737, August.
    • Handle: RePEc:wly:jfutmk:v:35:y:2015:i:8:p:715-737
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    Cited by:

    1. Mengyu Zhang & Thanos Verousis & Iordanis Kalaitzoglou, 2022. "Information and the arrival rate of option trading volume," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(4), pages 605-644, April.
    2. Dian‐Xuan Kao & Wei‐Che Tsai & Yaw‐Huei Wang & Kuang‐Chieh Yen, 2018. "An analysis on the intraday trading activity of VIX derivatives," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(2), pages 158-174, February.
    3. Yi‐Wei Chuang & Wei‐Che Tsai & Ming‐Hung Wu, 2020. "The impact of net buying pressure on VIX option prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(2), pages 209-227, February.
    4. Chen Gu & Xu Guo & Alexander Kurov & Raluca Stan, 2022. "The information content of the volatility index options trading volume," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(9), pages 1721-1737, September.
    5. Ai Jun Hou & Lars L. Nordén, 2018. "VIX futures calendar spreads," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(7), pages 822-838, July.
    6. Doojin Ryu & Jinyoung Yu, 2021. "Informed options trading around holidays," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(5), pages 658-685, May.
    7. Ho, Hwai-Chung & Tsai, Wei-Che, 2020. "Price delay and post-earnings announcement drift anomalies: The role of option-implied betas," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).

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