HCBE Faculty Articles

The role of fleeting orders on option expiration days

Document Type

Article

Publication Date

7-25-2023

Publication Title

Quantitative Finance

ISSN or ISBN

1469-7688

Volume

23

Issue/Number

10

First Page

1511

Last Page

1529

Abstract/Excerpt

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.

DOI

10.1080/14697688.2023.2229375

ORCID ID

0000-0002-0362-3057.

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