Net buying pressure and the information in bitcoin option trades

Alexander, Carol, Deng, Jun, Feng, Jianfen and Wan, Huning (2022) Net buying pressure and the information in bitcoin option trades. Journal of Financial Markets. a100764. ISSN 1386-4181

[img] PDF - Published Version
Restricted to SRO admin only

Download (1MB)
[img] PDF - Accepted Version
Restricted to SRO admin only until 8 January 2024.

Download (1MB)

Abstract

Bitcoin 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.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 26 Jul 2022 15:50
Last Modified: 27 Jul 2022 14:30
URI: http://sro.sussex.ac.uk/id/eprint/107048

View download statistics for this item

📧 Request an update