Delta and vega exposure trading in stock and option markets

摘要

This paper introduces an empirical method to evaluate the composition of trading activity in stock and option markets that is based on signed trade count imbalances in these markets. This method can be used to estimate the extent to which traders use option markets to obtain exposure to stock return volatility (i.e., vega exposure) versus exposure to the sign of stock returns (i.e., delta exposure), as well as examine traders' preferences on trading venue by desired exposure type. We present evidence suggesting that trading for vega exposure is a much larger component of option activity than is trading for delta exposure. The results also imply that delta-motivated traders have a preference for trading stocks over options, while both delta- and vega-motivated traders appear more prone to trade calls over puts.