Timing Option Trades to Suppress Trading Frictions
April 13, 2015 - Equity Options
Do equity option traders really bear the relatively large quoted bid-ask spreads as trading frictions? In their March 2015 paper entitled “Option Trading Costs Are Lower Than You Think”, Dmitriy Muravyev and Neil Pearson examine whether the predictability of changes in quoted option prices enables sophisticated investors to suppress option trading frictions. Instead of the bid-ask midpoint, they use… Keep Reading