Department of Finance, Yuan Ze University Department of Money and Banking, National Kaohsiung First University
Abstract:
This paper contributes to the literature on derivatives by investigating unique intraday data on Taiwan stock options in an effort to conduct a more detailed study of non-market maker investors who fall into various categories (individual investors, local companies, futures and stock brokers, and qualified foreign institutional investors) by observing their option trading behavior from 2003/01/20 to 2007/12/31. The paper also contributes to delineating the theme of options open interest and trading volume relative to the total number of shares outstanding, and a straddle strategy proposed by Lakonishok et al. (2007) aimed at uncovering generalized phenomena related to option trading behaviours by different classes of investors. Empirical results demonstrate that individual investors dominate the Taiwan stock options market. The writing of call options is more popular over the long run, while purchased call positions are more attractive for short term speculation trading. In addition, there is no straddle trading strategy adopted by qualified foreign institutional investors due to regulatory restrictions.
