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| Author: | Pope, P. F. Yadav, P. K. |
| Title: | The impact of option expiration on underlying stocks: the UK evidence. |
| Journal: | Journal of Business Finance and Accounting
1992 : APR, VOL. 19:3, p. 329-344 |
| Index terms: | OPTIONS STOCK EXCHANGES SHARE PRICES UNITED KINGDOM |
| Language: | eng |
| Abstract: | Recently there has been renewed interest in the impact of options trading on the market for underlying stocks. This study analyses the impact of option expiration on the price and trading volume of equities traded on the London Stock Exchange. The results suggest that, after controlling for intra-week seasonalities and cross-sectional correlations, share prices fall significantly near to expiration and trading volume is higher. This supports the hypothesis that abnormal volume of trading arising from the unwinding of arbitrage related positions and the sale of redundant blocks of stock creates a price pressure consistent with a downward sloping demand curve. |
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