The role of fleeting orders on option expiration days

We employ NASDAQ order level data to analyze intraday trading at option expirations and cross-market price pressure spillover. We observe more fleeting orders in optionable stocks on option expiration versus non-expiration days. The relation between NBBO proximity to strike prices and fleeting order...

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Bibliographic Details
Published inQuantitative finance Vol. 23; no. 10; pp. 1511 - 1529
Main Authors Figueiredo, Antonio, Jain, Pankaj, Mishra, Suchismita
Format Journal Article
LanguageEnglish
Published Bristol Routledge 03.10.2023
Taylor & Francis Ltd
Subjects
Market manipulation
Market microstructure
Option expiration
Order dynamics
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Summary:We employ NASDAQ order level data to analyze intraday trading at option expirations and cross-market price pressure spillover. We observe more fleeting orders in optionable stocks on option expiration versus non-expiration days. The relation between NBBO proximity to strike prices and fleeting order direction, the relation between option Open Interest and fleeting order direction, as well as their placement outside NBBO suggest spoofing and price manipulation rather than a simple search for latent liquidity. We show that fleeting orders impact subsequent NBBO and increase likelihood of stock prices crossing option strike prices on option expiration days.
ISSN:1469-7688
1469-7696
DOI:10.1080/14697688.2023.2229375