Futures and Option Prices After the Stock Market Close: Evidence from the Korean Markets

Abstract

In the KOSPI2oo futures and option markets. additional fifteen minutes (15 : 00∼15 개5) after the underlying stock market close are given tor the adjustments of the futures and option positions. During the first five minutes. 15: 00∼15 : 05. a continuous auction trading is made. while the trading at a single clearing price is made for the remaining ten minutes. 15: 05∼15: 15. Previous studies focused on the synchronous trading in terms of transaction time in the analysis of the lead-lag relationship. truncating the futures and option data during 15 : 00∼15 : 15. In this article. we explore how the KOSPI2oo futures and option returns for the extra fifteen minutes impact the next day's KOSPI200 cash returns, We also examine the lead-lag relationship during the reggular trading hours (9 : 00∼15 : 00) and the impact of the cash returns during 14 : 20∼15 : 00 on futures and option returns during 15 : 00∼15: 15. Our main findings are summarized as follows. First. the KOSPI200 futures and option returns during 15 : 00∼15 : 15 lead the close-to-open KOSPI200 cash return, even though the trading volume and return volatility during 15: 00∼15: 15 are lower relative to the regular stock market session (9 : 00∼15: 00). The impact of the futures and option returns on the cash return lasts hlK) minutes and one minute‘ repectively. after the next day open. Second. the option return during the continuous auction trading session (15 : 00∼ 15 : 05) leads the close-to-open cash return. while the futures return of trading at a single clearing price during 15 : 05∼15 : 10 impacts the close-to-open cash return. Third, we found that the lead-lag relationships among the KOSPI200 futures, option, and cash returns are not constant during the reg비ar stock market session‘ In partieular. the impact of the KOSPI200 cash ret un during 14 : 40∼15 : 00 on the futures and option retuns for the 15 : 00∼15: 15 Interval is much stronger. compared with other time zones. Finally. the KOSPI200 cash return during the last ten minutes of trading at a Single clearing price (14 : 50∼15 : 00). significantly impacts the option return during 15: 00∼15: 05. while there is no impact on the futures return (15 : 00∼15: 15).