A trading strategy based on Callable Bull/Bear Contracts

Author(s)
Author(s)
Cheung, Y.-W.
He, A. W. W.
Wan, A. T. K.
Date Issued
2010
Publisher
Elsevier
Journal
Pacific-Basin Finance Journal
Volume
18
Issue
2
Start page
186
End page
198
Abstract
The Callable Bull/Bear Contract is a barrier options contract recently introduced to the Hong Kong market. In this study, we propose a trading strategy that defines the entry point and exit point using information on the contract's call price and mandatory call event. Using data on contracts based on the Hong Kong Hang Seng Index, it is shown that the proposed trading strategy, on average, yields some decent trading returns that vary quite substantially across individual trades. Exploratory analyses indicate that trading returns are associated with volatility observed during a contract's lifespan and, to a lesser extent, with volatility in the pre-issuance period. Further, an issuer's relative issuing frequency may bear some implications for the trading strategy's performance.
URI
DOI
SFU Affiliated Publication
No
Availability at SFU Library

No database links found.