In search of seasonality in intraday and overnight option returns

Turan G. Bali, Amit Goyal, Mathis Mörke and Florian Weigert

No 26-02, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: We uncover momentum and reversal patterns in half-day option returns that persist for up to at least 20 business days, with economic magnitudes of 0.22% to 0.45% per half-day. Specifically, returns show strong momentum within the same period (e.g., intraday-to-intraday) but reverse sharply across opposite periods (e.g., intraday-to- overnight). These patterns increase over time, are robust to various delta-hedging schemes and option selection criteria, and persist across different subsamples. Mo- mentum and reversal strengthen when market makers actively manage capacity constraints during intraday-overnight transitions, indicating supply-side constraints drive predictability.

Keywords: Option return momentum; Option return reversal; Intraday option returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 G14 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:336775

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