Threshold Levels, Strike Price Grid and Other Market Microstructure Issues Associated with Exchange Traded Equity Options: A Note

The Journal of Futures Markets, Forthcoming

Posted: 27 Feb 2009

See all articles by Edwin D. Maberly

Edwin D. Maberly

Monash University

Raylene M. Pierce

Deakin University

Patrick Catania

Chicago Board of Trade Education Research Foundation

Date Written: January 24, 2009

Abstract

This paper addresses a number of important market microstructure issues associated with exchange traded equity options having significant research implications for studies investigating clustering on option strike prices. Price threshold levels are examined associated with exchange listing and the automatic exercise of equity options as established by the SEC and OCC to carry out their regulatory and oversight responsibilities. Significant changes are documented including motivation for such changes. Market microstructure issues potentially impact equity options research outcomes and one important issue is documenting changes over time to the strike price grid. A chronological outline of the introduction of option strike codes from April 26, 1973 through December 2008 is presented. Pricing discrepancies are documented between S&P's end-of-day updates (closing prices) and similar prices reported by CRSP, Thompson and Bloomberg, which is the source of ambiguities associated with the OCC's official settlement price. A number of quirks associated with option databases are identified of potential interest to researchers.

Keywords: Equity Options, Threshold Levels, Strike Price Grid, Official Settlement Price, Option Databases

JEL Classification: G13

Suggested Citation

Maberly, Edwin D. and Pierce, Raylene Marie and Catania, Patrick, Threshold Levels, Strike Price Grid and Other Market Microstructure Issues Associated with Exchange Traded Equity Options: A Note (January 24, 2009). The Journal of Futures Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1348447

Edwin D. Maberly (Contact Author)

Monash University ( email )

Clayton Campus
Wellington Road
Clayton, VIC 3800
Australia
61399055178 (Phone)

Raylene Marie Pierce

Deakin University ( email )

75 Pigdons Road
Victoria, Victoria 3216
Australia

Patrick Catania

Chicago Board of Trade Education Research Foundation ( email )

141 West Jackson Blvd.
Chicago, IL 60604-2994
United States
773-239-2633 (Phone)
773-238-2754 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
801
PlumX Metrics