A study on profitability of trading strategies in TAIEX options

• Main Authors: Mei-hsueh Huang, 黃美雪
• Other Authors: Chin-Sheng Huang
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/78737353552587319624

碩士 === 國立雲林科技大學 === 財務金融系碩士班 === 95 === Abstract Since first lunched into the market, TAIEX options have been popularized among investors. However, in the option market, the naïve investors, when trading, usually restricted themselves in single buy or sell position separately. These investors actually neglect the characters of risk and performance, and therefore lose on those investments. Empirically this study aims at testing the profitability of 16 trading strategies in TAIEX options. By setting fixed entry timing, adjusting strike price, and holding positions to settlement day, this study calculates the investment performance of these 16 strategies during the period January 2002- January 2007, amounting to 61 months. The main findings in this study including: 1. Selling options is more profitable than buying, as well as trading put is better than call. 2. In terms of profit frequencies, trading strategies such as short call, short put, bull put spread, short straddle, and short strangle, have better performance and outperform TAIEX. 3. In terms of total rate of return, short put hits 25%-38% and bull put spread scores 3%-5%, both strategies are more suitable for investors to adopt in their trading processes. 4. Strategies of short put with out-of-the-the-money one-to-three series outperform market at 77% of the time and have average return at 25%. 5.Strategies of short bull put spread with out-of-the- the-money one-to-two series outperform market at 69% of the time but only have 3%~5% rate of return. 6. Strategy of selling strangle with out-of- the-money at three strike prices away outperforms market at 77% of the time and has the rate of return about 25%. Hopefully, the conclusions drawn from this study can help investors to construct profitable option portfolios. Through these strategies, investors can adjust the reality of market and increase the probability of outperforming the market. Key words: option, trading strategy, gain or loss at expiration