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Contribution Details

Type Bachelor's Thesis
Scope Discipline-based scholarship
Title Development of an investment strategy based on traded option volumes
Organization Unit
Authors
  • Ducceschi Sascha
Supervisors
  • Erich Walter Farkas
  • Alexander Smirnow
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Date 2022
Abstract Text This Thesis aims to confirm the relationship between option volume and abnormal re- turns in the context of insider trading, as it has already been investigated in various studies, and to test whether the effects are strong enough to develop a profitable invest- ment strategy based on them. For this purpose, I used various measurements based on the volume of traded call and put options prior to abnormal trading days and tested them statistically on a data set of 92 S&P500 companies. Based on the findings from the statistical analysis and the theoretical foundations, various investment strategies were developed. I conclude that although a relationship between option volume and abnormal returns prior to abnormal trading days, as shown in previous studies, can be confirmed, the effects are not strong enough to develop profitable investment strategies. I see the main reason for this as being the fact that increases in the options volume based parameters used do not occur exclusively before abnormal trading days, but also on normal trading days, as well as the fact that increases prior to abnormal trading days usually do not occur unilaterally, which makes prediction very difficult.
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