The impact of execution delay on the profitability of put-call-futures trading strategies - Evidence from Taiwan

Jong Rong Chiou, Wen-liang Hsieh, Yuan Yi Lin*

*Corresponding author for this work

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

This study examines the impact of execution delay on the profitability of put-call-futures quasi-arbitrage strategies using trade and quote data in the Taiwanese market. Assuming order execution at the next immediate price following a mispricing signal, the execution of individual components is traced and a substantial delay resulting from the late execution of an option is reported. A fill-or-kill strategy that directly restricts such a delay is unsatisfactory because unwinding already acquired positions involves added transaction costs. Ex ante performance is significantly improved for combined strategies that execute the less liquid asset first, while shortening the time before acquisition of the first position.

Original languageEnglish
Pages (from-to)361-385
Number of pages25
JournalJournal of Futures Markets
Volume27
Issue number4
DOIs
StatePublished - 1 Apr 2007

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