V.
RESULTS
The tests results of the MA method are reported in Tables 1 and 2 and Figure 1 for the
TAIEX Index.
From table 1, we can see the MA method yields a much higher return than the BH
policy. For the bullish investment position (sell-put option strategy), the sell-put
option strategy yields a totally absolute return of 495455 (proof in figure 1) for the entire
test period compared with 2% for the BH policy. For the bearish investment position
(sell-call option strategy), the sell-call option strategy yields a total return of 858595
(proof in figure 2) for the entire test period compared with 2% for the BH policy.
From table 1, we also can see the MA method yields a much higher success
proportion.
The relatively very high success proportion of 92%(proof in figure 3) strengthens this
result. Of the total number of 883 transactions suggested by the MA method for the
studied sample time period, 866(301^565) transactions were found successful in the
sense that a signal (bullish or bearish) produced a positive return. In other words, for a
bullish signal for which the 1-day short-period MA crosses the long-period MA of 5day MA in an upward direction the subsequent actual market trend was positive, as
the signal indicated for the bullish position. For a bearish signal, for which the 1-day
short-period MA crosses the long period 5-day in a downward direction, the
subsequent actual market trend was negative, implying a positive return on the bearish
position suggested by the signal.
Though transaction costs may lower the net return on the MA method, it is important
in this context to note that TXO charge each NT$25 as each transaction cost that is
very low transaction cost.
The following is the comparison between the sell- call option strategy and the sell-put
option strategy.
（1)
For the bullish investment position (sell-put option strategy), the sellput option strategy yields a totally absolute return of 495455(Absolute return
differs from relative return because it is concerned with the return of a
particular asset and does not compare it to any other measure or benchmark.).
（2)
Of the total number of 312 transactions, 301 transactions were found
successful in the sense that a signal (bullish) produced a positive return.
（3) The success rate is 0.96474(
) for the sell-put option
strategy.
（4) The success rate is 0.98949 (
) for the sell- call option
strategy.
（5) The success rate is found higher for the sell- call option strategy (
) than for the sell-put option strategy (
).
（6) The totally absolute return is found higher for the sell- call option strategy
(858595) than for the sell-put option strategy (495455).
（7) For the sell-put option, the number of successful transactions is 301 which
yields an average (per transaction) return of 1588, while for the sell-call
option, the number of successful transactions is 565 yielding an average return
of 1503.67.
（8) The maximum return is found higher for the sell- call option strategy
(75950) than for the sell-put option strategy (19800).
（9) The minimum return is found lower for the sell- call option strategy (11000) than for the sell-put option strategy (-2275).
Table 1
Moving average returns and success proportion for the TAIEX Index
Moving Average
Total Return on BH (%)
MA5 1 in TAIEX
0.02
Total Returns on sell-put option2
495455
Total Returns on sell-call option2
858595
Number of Successful sell-put option strategy4
301
Number of Successful sell-call option strategy4
565
Total Number of Successful sell-put and sell-call Signals
866
Total Number of Transactions
883
Success Proportion (%)5
92%
1.
2.
3.
4.
5.
A 1-n, such as MA5 1 moving average (MA) in TAIEX, where n = 5 0r 20,
indicates a 1-day (short) MA crossing a n- day (long) MA upward or
downward.
Total Returns on sell-put option2 strategy is the total return for the test period
achieved from maintaining a bullish position when the MA signal is upward,
and Total Returns on sell-call option2 strategy when the MA signal is
downward.
Average Return on sell-put option3 is the (per transaction) average return
achieved for all Returns on sell-put option3 transactions during the test
period, while Average Return on sell-call option3 is the (per transaction)
average return achieved for all Returns on sell-call option3 transactions.
A successful sell-put Signals4 (sell-call Signals4) is a signal, which
successfully predicts an upward (downward) market trend of the index.
The Success Proportion (%)5 is the ratio of the total successful sell-put
signals4 (sell-call signals4) over the total number of signals (or transactions)
during the test period.
Furthermore, sell-call option strategy makes more money than sell-put option strategy
makes. The total return on the on sell-call option strategy is 858595, and for the sellput option strategy it is as low as 495455, implying a higher success rate (or
equivalently a lower failure rate) in the sell-call option signals mainly.
Total Returns on sell-put option2
495455
Total Returns on sell-call option2
858595
Another interesting issues investigated is whether the average return per transaction in
either the sell-put (sell-call option strategy) transaction has its source in the relatively
small number of transactions which inflates the average. To test whether the
application of the MA strategy to the present sample produces systematic and uniform
returns, Table 2 presents the segmentation of the number of successful transactions (or
signal) by the position return on both the sell-put option strategy and sell-call option
strategy. Starting with the sell-put option strategy of MA5 , Table 2 indicates that most
of the successful transactions suggested by the sell-put option achieved return levels
up to 5% per transaction (on average), while about 1/3 of them achieved a return level
higher than 5% per transaction (on average). Similar results are obtained for the
successful transactions suggested by the sell-call option strategy, as indicated by the
lower part of Table 2 for the MA5 in TAIEX. For this MA, as noted above, the return
was found much higher than for the BH policy.
Table 2
Segmentation of the number of successful transactions (signals) by the position return
on both sell-put option strategy (sell-call option strategy) for the TXO
Return on Successful sell-put option strategy MA5 in TAIEX
Dollars
frequencies
0~1000
10
1000~2000
25
2000~4000
15
4000~8000
20
8000~16000
30
16000~32000
25
32000~64000
20
64000~128000
10
>128000
>0
5
160
Total Transactions
1000
Return on Successful sell-call option strategy MA5
Dollars
frequencies
0~1000
200
1000~2000
100
2000~4000
90
4000~8000
80
8000~16000
70
16000~32000
50
32000~64000
40
64000~128000
30
>128000
20
>0
680
Total Transactions
10000
Total Successful Transactions 160+680
The distribution of the successful transactions by their return, as demonstrated in
Table 2, indicates that the success in beating the BH policy is not necessarily due to
very high returns achieved in very few transactions. Table 3
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Item
Description
Underlying Index
Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX)
Ticker Symbol
TXO
Exercise Style
European
Multiplier
NTD 50 (per index point)
Expiration Months
Spot month, the next two calendar months, and the next two quarterly
months
●Strike price below 3,000 points: 50 index points in the spot month
and the next two calendar months, 100 index points in the two
quarterly months
Strike Price Interval
●Strike price at or above 3,000 but below 10,000 points: 100 index
points in the spot month and the next two calendar months, 200
index points in the two quarterly months
●Strike price at or above 10,000 points: 200 index points in the spot
month and the next two calendar months, 400 index points in the two
quarterly months
Strike (Exercise) Price
For listing series of new expiration months or series with new strike
prices for existing expiration dates, the TAIFEX shall, based on the
previous business day's closing price of the underlying index ,
consecutively introduce series with new strike prices according to the
strike price interval above, till the following conditions are satisfied:
1. For the spot month and the next two calendar months, the highest and
lowest strike prices should cover 15 percent above and below the
underlying index;
2. For the next two quarterly months, the highest and lowest strike
prices should cover 20 percent above and below the underlying index.
Premium Quotation
< 10 points: 0.1 point (NTD5)
>=10 points,<50 points: 0.5 point (NTD 25)
>=50 points, <500 points: 1 point (NTD 50)
>=500 points, <1,000 points: 5 point (NTD 250)
>=1,000 points: 10 point (NTD 500)
Daily Price Limit
+/- 7% of previous day's closing price of the underlying index
Position Limit
1.Any investor's aggregate open same-side positions in the Contract for
various delivery months at any time shall not exceed the limit
standards announced by the TAIFEX
2.Institutional investors may apply for an exemption from the above
limit on trading accounts for hedging purpose
3.These position limits are not applicable to omnibus accounts
Trading Hours
08:45AM - 1:45 PM Taiwan time Monday through Friday of the
regular Taiwan Stock Exchange business days.
08:45AM-1:30PM on the last trading day for the delivery month
contract.
Last Trading Day
The third Wednesday of the delivery month
Expiration Date
The same day as the last trading day
Final Settlement Price
The average price of the underlying index disclosed within the last 30
minutes prior to the close of trading on the final settlement day.
Settlement
Cash settlement. An option that is in-the-money and has not been
liquidated or exercised on the expiration day shall, in the absence of
contrary instructions delivered to the Exchange by the Clearing
Member representing the option buyer, be exercised automatically
Information Vendors
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Capitalization Weighted Stock
Item
Description
Underlying Index
Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX)
Ticker Symbol
TXO
Exercise Style
European
Multiplier
NTD 50 (per index point)
Expiration Months
Spot month, the next two calendar months, and the next two quarterly
months
●Strike price below 3,000 points: 50 index points in the spot month
and the next two calendar months, 100 index points in the two
quarterly months
Strike Price Interval
●Strike price at or above 3,000 but below 10,000 points: 100 index
points in the spot month and the next two calendar months, 200
index points in the two quarterly months
●Strike price at or above 10,000 points: 200 index points in the spot
month and the next two calendar months, 400 index points in the two
quarterly months
Strike (Exercise) Price
For listing series of new expiration months or series with new strike
prices for existing expiration dates, the TAIFEX shall, based on the
previous business day's closing price of the underlying index ,
consecutively introduce series with new strike prices according to the
strike price interval above, till the following conditions are satisfied:
1. For the spot month and the next two calendar months, the highest and
lowest strike prices should cover 15 percent above and below the
underlying index;
2. For the next two quarterly months, the highest and lowest strike
prices should cover 20 percent above and below the underlying index.
Premium Quotation
< 10 points: 0.1 point (NTD5)
>=10 points,<50 points: 0.5 point (NTD 25)
>=50 points, <500 points: 1 point (NTD 50)
>=500 points, <1,000 points: 5 point (NTD 250)
>=1,000 points: 10 point (NTD 500)
Daily Price Limit
+/- 7% of previous day's closing price of the underlying index
Position Limit
1.Any investor's aggregate open same-side positions in the Contract for
various delivery months at any time shall not exceed the limit
standards announced by the TAIFEX
2.Institutional investors may apply for an exemption from the above
limit on trading accounts for hedging purpose
3.These position limits are not applicable to omnibus accounts
Trading Hours
08:45AM - 1:45 PM Taiwan time Monday through Friday of the
regular Taiwan Stock Exchange business days.
08:45AM-1:30PM on the last trading day for the delivery month
contract.
Last Trading Day
The third Wednesday of the delivery month
Expiration Date
The same day as the last trading day
Final Settlement Price
The average price of the underlying index disclosed within the last 30
minutes prior to the close of trading on the final settlement day.
Settlement
Cash settlement. An option that is in-the-money and has not been
liquidated or exercised on the expiration day shall, in the absence of
contrary instructions delivered to the Exchange by the Clearing
Member representing the option buyer, be exercised automatically
Information Vendors
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※Taiwan Futures Exchange Corporation Trading Rules for Taiwan Stock Exchange
Capitalization Weighted Stock Index Options Contracts