Order Flow and Expected Option Returns

• 成果类型: Article
• 署名作者: Muravyev, Dmitriy
• 署名单位: Boston College
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12380
• 发表日期: 2016
• 页码: 673-708
• 关键词: BID-ASK SPREAD; Market makers; STOCK; components; prices; trades; volume; COSTS

摘要

I show that the inventory risk faced by market-makers has a first-order effect on option prices. I introduce a simple approach that decomposes the price impact of trades into inventory risk and asymmetric information components. While both components are large for option trades, the inventory risk component is larger. Using the full panel of daily option returns, I find that option order imbalances attributable to inventory risk have five times larger impact on option prices than previously thought. Finally, I find that past order imbalances have greater predictive power than any other commonly used predictor of option returns.