The Role of Fleeting Orders on Options Expiration

51 Pages Posted: 19 Mar 2021

See all articles by Antonio Figueiredo

Antonio Figueiredo

Nova Southeastern University

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics

Suchi Mishra

Florida International University (FIU) - Department of Finance

Date Written: March 15, 2021

Abstract

We employ NASDAQ order level data to analyze intraday trading at option expirations and cross-market price pressure spillover. Algorithmic traders appear to place proportionately more fleeting orders in optionable stocks on option expiration versus non-expiration days. Since most observed fleeting orders are outside the NBBO, we discard the possibility that their purpose is to search for latent liquidity. Relation between NBBO proximity to strike prices and fleeting order direction implies they play a role in stock price clustering on option expiration days. We show that fleeting orders impact subsequent NBBO and that fleeting order direction is related to option Open Interest.

Keywords: Option expiration; manipulation; order dynamics; microstructure

JEL Classification: G12, G13, G14, G24

Suggested Citation

Figueiredo, Antonio and Jain, Pankaj K. and Mishra, Suchismita, The Role of Fleeting Orders on Options Expiration (March 15, 2021). Available at SSRN: https://ssrn.com/abstract=3805050 or http://dx.doi.org/10.2139/ssrn.3805050

Antonio Figueiredo

Nova Southeastern University ( email )

3301 College Avenue
Ft. Lauderdale, FL 33314
United States

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Suchismita Mishra (Contact Author)

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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