Early unwinding strategy in index options-futures arbitrage

Tsz Wan Cheng, Joseph K.W. Fung, Castor Pang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

12 Citations (Scopus)


We first re-examine buy-and-hold arbitrage strategies using both ex-post and ex-ante index options and futures data in Hong Kong. The results show that the arbitrage profit is not large enough to cover the transaction costs for both individual and institutional investors. Second, we find that, when an early unwinding strategy is employed, the arbitrage profit improves significantly under ex-post analysis but only improves slightly under ex-ante analysis. In addition, opportunities for same-day unwinding are limited. Finally, our regression results indicate the magnitude of the arbitrage profit is positively related to the volatility of the stock market.
Original languageEnglish
Pages (from-to)447-467
Number of pages21
JournalJournal of Financial Research
Issue number4
Publication statusPublished - 1 Jan 1998

ASJC Scopus subject areas

  • Accounting
  • Finance


Dive into the research topics of 'Early unwinding strategy in index options-futures arbitrage'. Together they form a unique fingerprint.

Cite this