Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/9058
Title: Net buying pressure, volatility smile, and abnormal profit of Hang Seng Index options
Authors: Chan, KC
Cheng, LTW 
Lung, PP
Issue Date: 2004
Publisher: John Wiley & Sons Inc
Source: Journal of futures markets, 2004, v. 24, no. 12, p. 1165-1194 How to cite?
Journal: Journal of Futures Markets 
Abstract: We use the net buying pressure hypothesis of N. P. B, Bollen and R. Whaley (2004) to examine the implied volatilities, options premiums, and options trading profits at various time-intervals across five different moneyness categories of Hong Kong Hang Seng Index (HSI) options. The results show that the hypothesis can well describe the newly developed Hong Kong index options markets. The abnormal trading profits by selling out-of-the-money puts with delta hedge are statistically and economically significant across all options maturities. The findings are robust with or without outlier adjustment. Moreover, we provide two insights about the hypothesis. First, net buying pressure is attributed to hedging activities. Second, the net buying pressure on calls is much weaker than that on put options.
URI: http://hdl.handle.net/10397/9058
ISSN: 0270-7314
DOI: 10.1002/fut.20134
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