Jumps in option prices and their determinants: Real-time evidence from the E-mini S&P 500 options market

George Kapetanios, Eirini Konstantinidi, Michael Neumann and George Skiadopoulos

Journal of Financial Markets, 2019, vol. 46, issue C

Abstract: We provide first-time evidence of the real-time characteristics and drivers of jumps in option prices. To this end, we employ high-frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the underlying futures price. We also find that 14%–28% of detected option price jumps occur around scheduled news releases. However, it is illiquidity rather than the news content that drives these jumps. Evidence suggests that option traders increase bid-ask spreads to account for trading against investors who are skilled processors of public news releases. Interestingly, illiquidity does not drive jumps in the S&P 500 index options market, where we also find sizable and idiosyncratic price jumps.

Keywords: Asymmetric information; Co-jump; Limit order book market; Liquidity; Option market; News announcement (search for similar items in EconPapers)
JEL-codes: C58 G10 G12 G13 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1386418118300168
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Jumps in Option Prices and Their Determinants: Real-time Evidence from the E-mini S&P 500 Option Market (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:46:y:2019:i:c:s1386418118300168

DOI: 10.1016/j.finmar.2019.100506

Access Statistics for this article

Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

More articles in Journal of Financial Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().