Options trading driven by volatility directional accuracy

Abstract: Analysts have claimed over the last years that the volatility of an asset is caused solely by the random arrival of new information about the future returns from the underlying asset. It is a common belief that volatility is of great importance in finance and it is one of the critical factors determining option prices and consequently driving option-trading strategies. This paper discusses an empirical option trading methodology based on efficient volatility direction forecasts. Although in most cases accurate volatility forecasts are hard to obtain, forecasting the direction is significantly easier. Increase in the directional accuracy leads to profitable investment strategies. The net gain is depended on the size of the changes as well; however successful volatility forecasts in terms of directional accuracy was found to be sufficient for positive results. In order to evaluate the proposed methodology weekly data from CAX40, DAX and the Greek FTSE/ASE 20 stock indices were used

Object Details

• Location: Deutsche Nationalbibliothek Frankfurt am Main
• Extent: Online-Ressource
• Language: Englisch
• Notes: Postprint ; begutachtet (peer reviewed) ; In: Applied Economics ; 39 (2006) 2 ; 253-260

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Veröffentlichung
• (where): Mannheim
• (when): 2006
• Creator: Maris, Konstantinos Michael ; Nikolopoulos, Konstantinos ; Giannelos, Konstantinos George ; Assimakopoulos, Vassilis

Further information

• DOI: 10.1080/00036840500427999
• URN: urn:nbn:de:0168-ssoar-239611
• Rights: Open Access unbekannt; Open Access; Der Zugriff auf das Objekt ist unbeschränkt möglich.
• Last update: 14.08.2025, 10:52 AM CEST