When trading options is not the only option: The effects of single-stock futures trading on options market quality

George J. Jiang, Yoshiki Shimizu, Cuyler Strong

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We use the 2008 short-selling ban to examine the impact of single-stock futures (SSFs) trading on options market quality. We show that there is a substitution effect between options trading and SSFs trading during the ban period. In addition, our results show that SSFs trading had a significant effect in narrowing the bid-ask spreads of options contracts. Moreover, compared to stocks without SSFs, stocks with SSFs were less likely to violate put-call parity during the ban period. Our results suggest that SSFs trading helps mitigate the negative effect of the short-selling ban on options market quality documented in the literature.

Original languageEnglish (US)
Pages (from-to)1398-1419
Number of pages22
JournalJournal of Futures Markets
Volume40
Issue number9
DOIs
StatePublished - Sep 1 2020

Keywords

  • financial crisis
  • options market quality
  • short-selling ban
  • single-stock futures

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