Weekend Effect for Individual Stock Options?
May 4, 2010 - Calendar Effects, Equity Options
Does reluctance of traders to hold naked short positions in individual stock options over weekends induce a weekend effect for option prices? In the February 2010 revision of their paper entitled “The Weekend Effect in Equity Option Returns”, Christopher Jones and Joshua Shemesh employ a portfolio approach to investigate a weekend effect for put and call options on U.S. stocks. They compute portfolio excess returns as the equally weighted average of individual option contract returns based on bid-ask midpoints, in excess of a short-term yield. Using price data for a filtered set of U.S. equity options and for the underlying stocks over the period January 1996 to June 2007, they conclude that: Keep Reading