Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

Option Expiration Day Impact on Underlying Stock Return- A Study on the Swedish Option Market

Penkina, Alisa LU ; Karaduman Sorsenger, Alan and Kakai, Sirwan (2023) FEKH89 20222
Department of Business Administration
Abstract
Research questions: Is there significant change in the stock return on option expiration dates in the underlying stock? Does the net open interest have an effect on the return of the underlying stock on option expiration day?
Purpose: The purpose of the bachelor's thesis is to study whether there is a significant difference in the stock returns on option expiration dates in relation to the net open interest of the underlying stocks within the OMXS30 index.
Methodology: A quantitative study using a deductive approach to statistically describe the relationship between the daily stock return with open interest and traded volume.
Theoretical perspective: The theoretical framework consists of option theory and empirical research on the... (More)
Research questions: Is there significant change in the stock return on option expiration dates in the underlying stock? Does the net open interest have an effect on the return of the underlying stock on option expiration day?
Purpose: The purpose of the bachelor's thesis is to study whether there is a significant difference in the stock returns on option expiration dates in relation to the net open interest of the underlying stocks within the OMXS30 index.
Methodology: A quantitative study using a deductive approach to statistically describe the relationship between the daily stock return with open interest and traded volume.
Theoretical perspective: The theoretical framework consists of option theory and empirical research on the impact of option expiration on traded volume and stock return, together with the relationship between stock returns during the expiration week and the option volume.
Result: Regression results show that months with high net open interest showed statistically significant results. November, which had low net open interest, showed no statistical significance. The null hypothesis could be rejected. The T-test also showed that the daily return on expiration day differs significantly from the average daily return during months except November.
Conclusions: Since the regression results show an R-squared above 0.1, we can conclude that there is statistical significance that a larger volume of open option contracts corresponds to a stronger correlation. We also saw the opposite in November, when a low net open interest showed low correlation. However, the correlation shows that traded volume and number of open contracts are not sufficient variables on their own to predict future returns. (Less)
Abstract (Swedish)
Forskningsfrågor: Är det statistiskt signifikant att det finns en förändringar i aktieavkastning på optionens förfallodag i den underliggande aktien? har de öppna options kontrakten en påverkan på aktieavkastningen på optionens förfallodag?
Syfte: Syftet med examensarbetet är att undersöka om det finns en signifikant skillnad i aktieavkastningen vid optionens förfallodag i relation till de öppna options kontrakten i de underliggande aktierna inom OMXS30-indexet.
Metod: En kvantitativ studie som använder en deduktiv ansats för att statistiskt beskriva relationen mellan den dagliga aktieavkastningen med open interest och handlad volym.
Teoretiska perspektiv: Det teoretiska ramverket består av optionsteori och empirisk forskning om... (More)
Forskningsfrågor: Är det statistiskt signifikant att det finns en förändringar i aktieavkastning på optionens förfallodag i den underliggande aktien? har de öppna options kontrakten en påverkan på aktieavkastningen på optionens förfallodag?
Syfte: Syftet med examensarbetet är att undersöka om det finns en signifikant skillnad i aktieavkastningen vid optionens förfallodag i relation till de öppna options kontrakten i de underliggande aktierna inom OMXS30-indexet.
Metod: En kvantitativ studie som använder en deduktiv ansats för att statistiskt beskriva relationen mellan den dagliga aktieavkastningen med open interest och handlad volym.
Teoretiska perspektiv: Det teoretiska ramverket består av optionsteori och empirisk forskning om förfallodagens påverkan på handlad volym och aktieavkastning, samt relationen mellan aktieavkastning under förfalloveckan och optionsvolymen.
Resultat: Regressionsresultaten visar att månader med hög net open interest visade statistiskt signifikanta resultat. November, som hade låg netto open interest, visade ingen statistisk signifikans. Nollhypotesen kunde förkastas. T-testet visade också att den dagliga avkastningen på förfallodagen skiljer sig signifikant från den genomsnittliga dagliga avkastningen under månader förutom November.
Slutsats: Eftersom regressionsresultatet visar en R-squared över 0.1 kan vi dra slutsatsen att det finns en statistisk signifikans för att en större volym av öppna optionskontrakt ger en starkare korrelation. Vi ser också motsatsen i November, då en låg net open interest visade låg korrelation. Korrelationen visar dock att handlad volym och antalet öppna kontrakt inte är tillräckliga variabler för att prognostisera framtida avkastning på egen hand. (Less)
Please use this url to cite or link to this publication:
author
Penkina, Alisa LU ; Karaduman Sorsenger, Alan and Kakai, Sirwan
supervisor
organization
course
FEKH89 20222
year
type
M2 - Bachelor Degree
subject
keywords
Option Market, Open Interest, Stock Return, Delta Hedging, Option Expiration Day
language
English
id
9106081
date added to LUP
2023-01-23 09:13:26
date last changed
2023-01-23 09:13:26
@misc{9106081,
  abstract     = {{Research questions: Is there significant change in the stock return on option expiration dates in the underlying stock? Does the net open interest have an effect on the return of the underlying stock on option expiration day? 
Purpose: The purpose of the bachelor's thesis is to study whether there is a significant difference in the stock returns on option expiration dates in relation to the net open interest of the underlying stocks within the OMXS30 index.
Methodology: A quantitative study using a deductive approach to statistically describe the relationship between the daily stock return with open interest and traded volume. 
Theoretical perspective: The theoretical framework consists of option theory and empirical research on the impact of option expiration on traded volume and stock return, together with the relationship between stock returns during the expiration week and the option volume. 
Result: Regression results show that months with high net open interest showed statistically significant results. November, which had low net open interest, showed no statistical significance. The null hypothesis could be rejected. The T-test also showed that the daily return on expiration day differs significantly from the average daily return during months except November.
Conclusions: Since the regression results show an R-squared above 0.1, we can conclude that there is statistical significance that a larger volume of open option contracts corresponds to a stronger correlation. We also saw the opposite in November, when a low net open interest showed low correlation. However, the correlation shows that traded volume and number of open contracts are not sufficient variables on their own to predict future returns.}},
  author       = {{Penkina, Alisa and Karaduman Sorsenger, Alan and Kakai, Sirwan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Option Expiration Day Impact on Underlying Stock Return- A Study on the Swedish Option Market}},
  year         = {{2023}},
}