The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and Cboe Options
JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, September 1995
Posted: 25 Aug 1998
We study the intraday behavior of bid-ask spreads for actively traded CBOE options and for their NYSE-traded underlying stocks. We confirm previous findings that stocks have a U-shaped spread pattern; however, the options display a very different intraday pattern--one that declines sharply after the open, and then levels off. Our results suggest that both the degree of competition in market making and the extent of informed trading are important for understanding the intraday behavior of spreads.
JEL Classification: G13
Suggested Citation: Suggested Citation