Abstract
We study China's flagship option market, Shanghai Stock Exchange (SSE) 50 ETF option market, and the information content of trading volume using a proprietary dataset. We find that open buy put-call ratio, defined as put volume over the sum of put and call volumes, of financial institutional investors negatively forecasts future SSE 50 ETF returns. We also estimate an upper bound on the trading volume of volatility strategy straddles. The open buy straddle ratio, defined as the estimated straddle volume over the sum of put and call volumes, of financial institutional investors positively forecasts one-day ahead SSE 50 ETF realised volatility.
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