Directional Trading across Stock Limit Order Book and Options Markets

摘要

This article examines the dynamic directional trading across stock limit order book and options markets using a sample of NYSE-listed stocks from November 2007 to January 2008. I find that stock limit order book aggressiveness and directional trading in the options markets Granger-cause each other. Further, percentages of stocks with Granger-Causality running in either or both directions between stock and option variables are bigger at the beginning and at the end of the day, and also bigger for large than for small bid-ask spread at the beginning and at the end of the trading day, and for OTM options.