The Effect of Paying Cash Dividend on Taiwan Index Option and Related Trading Strategies

• Main Authors: Un-Hoei Kau, 高妏惠
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/34880043452940385075

碩士 === 東吳大學 === 國際貿易學系 === 94 === The market price of the index options will converge to theoretical price when the option contract is close to maturity. According to the feature, this paper is using the spread between the market price and theoretical price of the index options as an indicator for deciding to when to sell or buy the index options. Then, this paper uses the inverse strategies to simulate the transactions. Subsequently, we will discuss the lead-lag relationship between the overestimating percentage of market price of index option and the daily changing ratio of return index after doing Granger Causality test. At last we will discuss the relationship between the outcome of simulating transactions and the result of the Granger Causality test. From the result, we will know the overestimating percentage of market price of Taiwan index call option after considering cash dividends is greater than that not considering cash dividends and the overestimating percentage of market price of Taiwan index put option after considering cash dividends is less than that not considering cash dividends. We find that two methods making up with six strategies-buy on a call option, write on a call option, buy and write on a call option, buy on a put option, write on a put option and buy and write on a put option will have positive returns after simulation transactions. The returns of first three strategies are listed as below: buy and put on a call option, buy on a call option and buy and put on a put option. At the same time, we know the strategies about call option after considering cash dividends are better than those not considering cash dividends. However, the strategies about put option after considering cash dividends aren’t better than those not considering cash dividends. Relating to the Granger Causality test, we find the result that the relationship between the overestimating percentage of market price of call option and the changing ratio of return index is two-way causality and the relationship between the overestimating percentage of market price of put option and the changing ratio of return index is one-way causality. Then after using the VAR model, we know that the lag time of the changing ratio of return index brings negative effect to the overestimating percentage of market price of call option and the lag time of the overestimating percentage of market price of call option brings positive effect to the changing ratio of return index. The overestimating percentage of market price of put option is leading the changing ratio of return index and the relationship is negative effect. At last, about the relationship between the outcome of simulating transactions and the result of the Granger Causality test, we find the strategies about call option after considering cash dividends are better than those not considering cash dividends, however, the strategies about put option after considering cash dividends aren’t better than those not considering cash dividends. This fact is relating to the result that the relationship between the overestimating percentage of market price of call option and the changing ratio of return index is two-way causality and the relationship between the overestimating percentage of market price of put option and the changing ratio of return index is one-way causality.