Date of Award
5-2016
Degree Type
Thesis
Degree Name
Master of Science (MS)
Department
Economics and Finance
Committee Chair(s)
Tyler Brough
Committee
Tyler Brough
Committee
Ben Blau
Committee
Ryan Whitby
Abstract
Are single stock futures and stock options complement or substitute goods? In this study, I test this research question by examining option trading activity (option volume and open interest) surrounding an arguably exogenous introduction of single stock futures. This event study provides a natural experiment that allows us to make causal inferences about how the presence of single stock futures affects the options market. While it is commonly thought that single stock futures and options are substitute goods, my evidence instead suggests that they are complements. While I observe very little change in option volume surrounding the introduction of single stock futures, I find that total open interest increases by 9%, on average, after the introduction of single stock futures. The most plausible explanation is that the introduction of single stock futures makes it easier to hedge the risk of writing on option.
Recommended Citation
Strong, Cuyler, "Single Stock Futures and Stock Options: Complement or Substitutes" (2016). All Graduate Plan B and other Reports, Spring 1920 to Spring 2023. 798.
https://digitalcommons.usu.edu/gradreports/798
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