This paper computes the out-the-sample trading results using
option pricingmodels and direct forecasting models. The
underlying assets are S&P 500 stock index trading on the CME in
U.S. The out-the-sample period is from January 1992to June 1996.
And the trading horizon is one month. The empirical results show
when transaction costs are not considered, using option pricing
model is thebetter strategy in actual trading. Ater considering
the transaction costs, usingthe ECM model is the better mothed.