The Intraday Behavior of Bid-Ask Spreads, Returns, and Volatility for Ftse-100 Stock Index Options

J. OF DERIVATIVES, Summer 1997

Posted: 31 Jul 1997

See all articles by Owain Ap Gwilym

Owain Ap Gwilym

Bangor Business School

Mike Buckle

University of Wales, Swansea - School of Business and Economics

Stephen Thomas

University of Southampton - School of Management

Abstract

The microstructure of stock markets and futures markets has attracted considerable recent attention, but the evidence relating to options markets is sparse, especially for the U.K. This article addresses this void in the literature by presenting evidence on the intraday behavior of bid-ask spreads, returns, volatility, and volume. Both clear differences and similarities are found with the previous results for other markets. Spreads are found to be wide near the market open and narrow near the close. Although this contrasts with some previous evidence in U.S. stock and futures markets of a U-shaped pattern in intraday spreads, it is consistent with other recent research, and the differences may be explained by differing market structures. No clear pattern emerges in options returns, but there is a U-shape across the day in returns volatility and in volume. The results help to differentiate between the competing theories of the intraday behavior of these key variables.

JEL Classification: G13, G14, G15

Suggested Citation

ap Gwilym, Owain and Buckle, Mike J. and Thomas, Stephen, The Intraday Behavior of Bid-Ask Spreads, Returns, and Volatility for Ftse-100 Stock Index Options. J. OF DERIVATIVES, Summer 1997. Available at SSRN: https://ssrn.com/abstract=8452

Owain Ap Gwilym (Contact Author)

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

HOME PAGE: http://www.bangor.ac.uk/business/staff/owain_ap_gwilym.php.en

Mike J. Buckle

University of Wales, Swansea - School of Business and Economics ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Stephen Thomas

University of Southampton - School of Management ( email )

Highfield
Southampton S017 1BJ, Hampshire SO17 1BJ
United Kingdom
+44 23 8059-3068 (Phone)
+44 23 8059-3844 (Fax)

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