ELW시장의 LP거래 체결패턴 분석

This study analyzed LP(Liquidity Provider) order book transactions and linked this pattern with high frequency traders(HFT)’s leverage trading strategy using a minute data of ELW index price. In order to do that, we have observed changes in LP’s bid/ask order quantities of ELWs with various expirations and transaction time, and analyzed LP’s order book pattern using PDR(Price Disparity Ratio) and VD(Volatility Disparity) between ELWs and options that have the same payoff structure. First, ELWs are generally actively traded intraday and LP order book quantities are highly towards ask when the market opens, bid when the market closes. In addition, it can be seen that the proportion of transactions with LPs for ELWs, which are out of the money or have short maturity, is high. This phenomenon is due to maximizing the profitability by optimizing the leverage effect, by trading cheap ELWs, which is due to the reduction of time value and being the out-of-money. Second, changes in LP order book quantities show more dominant ELW ask orders until the market closes, and at the market closing, shows more dominant bid orders regardless of maturity of ELWs. ELWs with the maturity of 3 weeks or less are showing gradual decrease in LP order book, and this implies that the share of investors in the ELW market has increased and that a large portion of the transaction has shifted from transactions between LPs and general investors to transactions among general investors. Third, as the remaining maturity shortens, the ELW price, which is the denominator of the PDR, decreases due to the decrease in the time value of the ELW, but the PDR shows a downward trend. This result is in agreement with the fact that it positively influences the liquidity of the market, such as Choi, Hyuk and Woo, Min-chul (2011). However, this study has analyzed the mechanism of this phenomenon in relation to the leverage trading strategy of HFTs in terms of academic and practical contributions. Finally, VD smile phenomenon due to difference in maturity is observed with similar pattern as the volatility smile phenomenon due to disparity with underlying shown in options market.