Nifty 50 Option Time Spreads

Indian Journal of Finance, Vol. 14, No. 8-9, August-September 2020, pp. 8-19.

12 Pages Posted: 23 Nov 2020

See all articles by Ronald T. Slivka

Ronald T. Slivka

NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering

Date Written: April 28, 2020

Abstract

The objective of this study was to identify and test preliminary rules for trading call option time spreads and then to assess opportunities for further research to improve on those rules. To do so the theoretical and empirical properties of near-the-money time spreads were used to develop four rules for profitably trading in India’s Nifty 50 (NSE 50) call options. Day-end pricing for 2015 – 2019 included periods of rising, falling and stable volatility. The resulting four rule algorithm produces positive results on out-of-sample data and was found to outperform a buy and hold strategy.

Because the general procedure followed for rule development was not country specific, it was separately applied to options on China’s SSE 50 index where the algorithm was also found to outperform a hold-to-expiry strategy in every year tested. These related studies of NSE 50 and SSE 50 option time spreads provide a helpful addition to the growing knowledge about the developing derivatives markets in India and China. New directions for further research are described.

Keywords: Nifty 50 Options, Time Spreads, Calendar Spreads

JEL Classification: G10, G11, G13, G14, G15

Suggested Citation

Slivka, Ronald T., Nifty 50 Option Time Spreads (April 28, 2020). Indian Journal of Finance, Vol. 14, No. 8-9, August-September 2020, pp. 8-19., Available at SSRN: https://ssrn.com/abstract=3704896 or http://dx.doi.org/10.2139/ssrn.3704896

Ronald T. Slivka (Contact Author)

NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering ( email )

Brooklyn, NY 11201
United States
2153213524 (Phone)

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