Assessing Shock Volatility using Long Straddle Option Strategy: Evidence at IDX Composite
Journal Title: Jurnal Keuangan dan Perbankan - Year 2018, Vol 22, Issue 1
Abstract
This study is to identify the probability of occurrence of shock volatility and its impact on return of an investment. Using IDX Composite data from 1998-2016 and long straddle option strategy at IDX composite consisting of 2 phases, high volatility daily return are 7 years with a total of 3432 observations, using 1716 call option simulation contracts, and 1716 put option simulation contracts and low volatility daily return are 12 years with a total of 5528 observations, using 2908 call option simulation contracts and 2908 put option simulation contracts. The result shows that the shock volatility occurs greater when the volatility below the average year of observation. Shock volatility during the year low volatility of 44.25 percent and period of year high volatility of 34.49 percent. But if calculated in total, based on 8960 observation from 1998-2016, where 4480 is call option and 4480 transaction is put transaction there is 1815 incident shock volatility or equal to 40.51. So the potential for profit (call and put option holders) or potential loss (call and put option seller) per day due to the occurrence of shock volatility of 40.51 percent.
Authors and Affiliations
Riko Hendrawan
Keywords
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- EP ID EP417954
- DOI 10.26905/jkdp.v22i1.1707
- Views 109
- Downloads 0
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