Comparative Research On Informed Trading In Futures Market And Option Market

Along with the rapid development of financial derivatives markets,many investors get involved in the derivatives transaction,making the market increasingly informative.Due to the flexible transaction forms,impressing trading volume and high leverage,derivatives markets attracts plenty of investors,especially those informed traders,which means that transaction of derivatives may contain implicit information.Therefore,this paper tried to detect the informed trading from options and futures market and made a comparison.Taking the market activity level and data processing difficulty into consideration,this paper chose the SSE 50 stock index futures and SSE 50 ETF option as study subject.As for indicator,we constructed futures trading imbalance and options trading imbalance by using the two product's tick data.Through the trading imbalance,we can know the net purchasing power pressure and power gap between the long and short sides in the market.So trading imbalance in short term may find private information in transaction and capture informed trading in the market.Then we used trading imbalance to predict the SSE 50 Index future return and volatility to test whether the options market and futures market have informed trading.The empirical results show that both futures and options markets contain return informed trading,and the return information in the options market is more abundant.In addition,the options market also contains volatility informed trading,while the futures market does not.We also carried out a further refinement study by establishing multiple comparative groups.Firstly,we divided the whole interval into the price increase interval and the price decline interval and then performed regression analysis separately.The empirical results can be listed as follow.In the price increase interval,there are both return informed trading and volatility informed trading in the options market.Also these are return information in futures market,and the futures trading imbalance has some kind of predictive ability to volatility.In the price decline interval,the option market only contains volatility informed trading,and there is no obvious implicit information in the futures market.Secondly,we constructed trading imbalances at different intervals and then performed regression analysis separately.The empirical results show that the return informed trading lasts for a short time,and the implicit information will be covered by the noise trader's transaction within 10 minutes.The volatility informed trading lasts for a long time,even the trading imbalance at 60-minute interval can still detect the volatility information.Lastly,we classified the option according to strike price and remaining time,and then performed regression analysis separately.On one hand,the return information and volatility information in in-the-money options are the most abundant.On the other hand,short-term option transaction has the most abundant return information,while middle-term option transaction has the most abundant volatility information.Based on these studies,we also offer some advices.