Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/337274 
Year of Publication: 
2024
Citation: 
[Journal:] Journal of Derivatives and Quantitative Studies: Seonmul yeon'gu (JDQS) [ISSN:] 2713-6647 [Volume:] 32 [Issue:] 1 [Year:] 2024 [Pages:] 58-81
Publisher: 
Emerald, Leeds
Abstract: 
Using the next-day and next-week returns of stocks in the Korean market, we examine the association of option volume ratios - i.e. the option-to-stock (O/S) ratio, which is the total volume of put options and call options scaled by total underlying equity volume, and the put-call (P/C) ratio, which is the put volume scaled by total put and call volume - with future returns. We find that O/S ratios are positively related to future returns, but P/C ratios have no significant association with returns. We calculate individual, institutional, and foreign investors' option ratios to determine which ratios are significantly related to future returns and find that, for all investors, higher O/S ratios predict higher future returns. The predictability of P/C depends on the investors: institutional and individual investors' P/C ratios are not related to returns, but foreign P/C predicts negative next-day returns. For net-buying O/S ratios, institutional net-buying put-to-stock ratios consistently predict negative future returns. Institutions' buying and selling put ratios also predict returns. In short, institutional put-to-share ratios predict future returns when we use various option ratios, but individual option ratios do not.
Subjects: 
Investor type
Net buying volume
Option-to-stock volume ratio
Put-call ratio
Return predictability
JEL: 
G12
G13
G14
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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