A Descriptive Study of High-Frequency Trade and Quote Option Data
55 Pages Posted: 7 Sep 2019
Date Written: August 30, 2019
This paper provides a guide to high frequency option trade and quote data disseminated by the Options Price Reporting Authority (OPRA). First, we present a comprehensive overview of the fragmented U.S. option market, including details on market regulation and the trading processes for all 15 constituent option exchanges. Then, we review the general structure of the OPRA dataset and present a thorough empirical description of the observed option trades and quotes for a selected sample of underlying assets that contains more than 25 billion records. We outline several types of irregular observations and provide recommendations for data filtering and cleaning. Finally, we illustrate the usefulness of the high frequency option data with two empirical applications: option-implied variance estimation and risk-neutral density estimation. Both applications highlight the richer information content of the high frequency OPRA data relative to the widely used end-of-day OptionMetrics data.
Keywords: Options Data, High Frequency Data, Market Microstructure
JEL Classification: C55, G10
Suggested Citation: Suggested Citation