JFinM_FINAL_2022.pdf (1.27 MB)
Net buying pressure and the information in bitcoin option trades
journal contribution
posted on 2023-06-07, 07:56 authored by Carol AlexanderCarol Alexander, Jun Deng, Jianfen Feng, Huning WanBitcoin prices are driven by upward as well as downward jumps and so the bitcoin implied volatility surface behaves differently from those of established options markets. We analyze tick-level Deribit option price data, demonstrating increasing support for the limits-to-arbitrage hypothesis. Hence market makers are managing order imbalance and inventory more effectively as Deribit bitcoin options trading volumes increases. On the demand side, volatility traders drive both at-the-money and out-of-the-money option prices, the latter also being driven by directional traders. Directional effects were most pronounced during the price bubble of 2021. Further refinements of our tests assess time-to-maturity and time-of-day effects.
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Publication status
- Published
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- Accepted version
Journal
Journal of Financial MarketsISSN
1386-4181Publisher
ElsevierExternal DOI
Article number
a100764Department affiliated with
- Accounting and Finance Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2022-07-26First Open Access (FOA) Date
2022-07-27First Compliant Deposit (FCD) Date
2022-07-26Usage metrics
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