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The purpose of this research is make a simulation as an empirical study through the short-term volatility and the long-term volatility, to find out the turning point of the Taiwan Stock-Index Options Market by the approach and out signals with these two indicators. And hope to get additional compensation in the market. As the observation period from 1/1/2005 to 12/31/2006, Two of in-the-money strike price and five of out-the-money strike price to the sample, use 2-10 days for the Short-term volatility and 3-20 days for the long-term volatility to study. In bull strategy it is approach signal when the Short-term volatility break up the long-term volatility, and the out signal when the Short-term volatility down below the long-term volatility. Analysis and find out the operation strategy of the Short-term volatility and the long-term volatility from the most profitable of these four basic strategies:buy call, sell put, sell call and buy put. And enter the test period from 1/1/2007 to 12/31/2007, divided into “considering transaction costs” and “without consider transaction costs” these two kinds of situations. To verify if the best operation strategy in observation period apply to the test period. In addition, in order to avoid can not buy for less turn over the study all set numbers of the turn over must be more then 1000, to meet with the reality of the situation.
The results found the operation sarategy of sell put and buy put got the excess reward of consistency, whether considering transaction costs or not, but it caused inconsistent situation of observation period profit and test period loss by the operation strategy of buy call and sell call. The buy call and sell call could not get excess reward in test period, for this point, further analysis found that there were two decline more then 1500 points in 2007(July and November),which were never happened in 2005 and 2006,coupled with the loss of time, caused the poor earnings of buy call. As for the sell call of bear strategy, it was used 7 days for the Short-term volatility and 20 days for the long-term volatility, and reflect the huge fluctuations were slower in 2007 because of the longer volatility, so it was the reason for the loss.
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