| Summary: | 碩士 === 東吳大學 === 財務工程與精算數學系 === 97 === The Taiwan Weighted Stock Index Option (TXO) has been traded since December 24th, 2001, nearly 8 years since it went public. The current average daily trading volume has reached over 300,000 units. The TXO contract claims the biggest trading volume in the Taiwan Futures Exchange (TAIFEX).
The purpose of this study is to explore the feasibility of arbitrage trading strategies in the high liquidity Taiwan stock market index option, after taking account into the transaction costs. The data is arbitrarily selected from September 4th, 2008 to January 21st, 2009. There is a total of 98 days’ trading record which includes TXO on spot month of all strike prices and ex ante in bid-ask prices are also adopted. We use three spread trading strategies (butterfly spread, condor spread, box spread) to carry on an empirical research to examine if these arbitrage strategies are still profitable after the deduction of real market transaction costs.
Several phenomena are concluded from this empirical study: (1) At any trading day, if the Taiwan stock index futures drops to a lower closing price (compared to the previous day’s closing price) and technical analysis indicates a potential reversal trend then a higher arbitrage profits can be generated on both the previous and the next trading day. (2) If the intraday trading pattern is U-curve shaped then a higher arbitrage profits can be generated in both market open and close time segments. The empirical results also show that after deducting transaction costs, the spread trading strategy can still obtain arbitrage profits, which implies a weak efficient TXO market.
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