Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/217480
Title: DESIGNING A PROFITABLE SYSTEMATIC OPTIONS TRADING STRATEGY
Authors: SEAN NG KUAN JIE
Keywords: FINANCE
Issue Date: 5-Apr-2021
Citation: SEAN NG KUAN JIE (2021-04-05). DESIGNING A PROFITABLE SYSTEMATIC OPTIONS TRADING STRATEGY. ScholarBank@NUS Repository.
Abstract: Options are popular financial instruments used by many traders. This is because they provide flexible methods for risk management and the ability to make creative time and volatility-related trades. Recently, there has been a rise in option trading post Covid-19. Hence, it seems like there would be value in studying a trading strategy that can be adopted widely. One popular trading strategy is selling put options on indices. There is extant literature surrounding the topic, however, our paper seeks to provide new insights by trying to explore new trading signals as well as entry and exit strategies which have not been covered as much in past research. We first define a Baseline Strategy based on the CBOE PutWrite Index. Then we try to come up with several trading variations to improve on the risk-return profile of this strategy. Subsequently, to test for the significance of our trading variations, we conduct several univariate and multivariate regressions. We find that it is indeed possible to increase returns and reduce risk by selling in the money options at the 0.55 delta mark and exiting trades at 21 DTE, all the while still having a strategy that is easy to adopt. Should trading opportunities as signalled by our regressed variables present themselves, option traders could stand to make even more profits.
URI: https://scholarbank.nus.edu.sg/handle/10635/217480
Appears in Collections:Bachelor's Theses

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