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AN examination of short QQQ option trades
Author(s) -
Simon David P.
Publication year - 2007
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20265
Subject(s) - straddle , volatility (finance) , profitability index , economics , profit (economics) , volatility smile , financial economics , econometrics , monetary economics , microeconomics , finance
This study shows that unconditional QQQ option selling strategies from January 2001 through November 2004 are generally significantly profitable after transactions costs. However, when straddle and strangle sales are combined with purchases of out of the money puts, few of the strategies are significantly profitable. Profits improve when the QQQ Volatility Index is high relative to time series volatility forecasts, but only when actual volatility is forecast to be moderate. Active delta‐hedging reduces profitability, whereas stop loss/take profit orders enhance profitability. Overall, QQQ short volatility trades appear to be less compelling than what others have found with S&P options. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:739–770, 2007