The Information Content of Trading Activity and Quote Changes: Evidence from VIX Options

Journal of Futures Markets (2014)

56 Pages Posted: 2 May 2017 Last revised: 9 Dec 2017

See all articles by Wei-Che Tsai

Wei-Che Tsai

Oregon State University; National Sun Yat-sen University - Department of Finance

Ying-Tzu Chiu

National Taiwan University

Yaw-Huei Wang

National Taiwan University; UNSW

Date Written: November 14, 2014

Abstract

We investigate the informational role of trading volume and quote changes in VIX options with regard to future movements in the index, based upon a high-frequency framework. Our results reveal that whilst volume imbalances convey no significant predictive information, quote changes in VIX options can significantly predict changes in the index, with this predictive power being more pronounced for VIX calls around monetary policy announcement periods. Our findings imply that when acting on market-wide information, traders in VIX options may prefer to submit limit orders, as opposed to market orders, leading to such information being contained in the quote changes.

Keywords: VIX index; VIX options; Trading activity; Quote changes

JEL Classification: G12, G14

Suggested Citation

Tsai, Wei-Che and Chiu, Ying-Tzu and Wang, Yaw-Huei, The Information Content of Trading Activity and Quote Changes: Evidence from VIX Options (November 14, 2014). Journal of Futures Markets (2014), Available at SSRN: https://ssrn.com/abstract=2961164 or http://dx.doi.org/10.2139/ssrn.2961164

Wei-Che Tsai (Contact Author)

Oregon State University ( email )

Corvallis, OR 97331
United States

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

Ying-Tzu Chiu

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

Yaw-Huei Wang

National Taiwan University ( email )

Department and Graduate Institute of Finance
College of Management
Taipei, 106
Taiwan
+886233661092 (Phone)
+886283695581 (Fax)

UNSW ( email )

Sydney, NSW 2052
Australia

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