Empirical Research On The Effect Of Shanghai Securities 50ETF Option On The Spot Market

Option is a contract that gives the buyer the right to buy or sell a certain amount of the asset at a price in a certain period of time according to the price agreed by both parties. Option began from the 17 th century during the period of Dutch "tulip fever", In 1973, the world’s first exchange traded options on the Chicago Board Options Exchange is traded. From this day on, the options market began into the rapid development period. Option as a kind of important derivative instruments, it has the function of hedging, reflecting the market on expectations of future spot price volatility and increasing stock market liquidity, it also can stabilize the fluctuation of spot market, price discovery, more effective asset allocation, improve the fund use efficiency on theory.On 9 February 2015, China launched Shanghai Securities 50 ETF options, as the first option products, Shanghai Securities 50 ETF launched on the spot market brought what effect, whether the market react the inncident? These are very worthy of study. The impact of options on the spot market is various, this research direction is due to the introduction of the 50 ETF options on the Shanghai stock market liquidity and volatility of the changes.In this paper, we use the event study method to analyze the short-term impact of the Shanghai Securities 50 ETF option on the spot market. Spot market for Shanghai Securities 50 ETF and 11 constituent stocks, through empirical research are: SSE 50 ETF option interval was announced in, increase the liquidity of Shanghai 50 ETF. However, the fluctuation had no significant changes. Also Shanghai Securities 50 ETF option introduced to increase the liquidity and volatility of 11 stocks; in Shanghai Securities 50 ETF options listed interval, introduction of the option only improve the mobility of 50 ETF, the constituent stock liquidity and volatility, and Shanghai Securities 50 ETF volatility had no effect.After that, the paper analyzes the change of liquidity and volatility of Shanghai Securities 50 ETF option after it launched. From the descriptive statistics of the Shanghai Securities 50 ETF option’s effects to the spot market in a long term: the launch of option did not reduce the liquidity of the stock market; but slightly increases the volatility of the stock market, however the fluctuation range is not big. Therefore, the option as a new derivative, will not lead to sharp fluctuations in the spot market, it mainly used for hedging, to avoid the risk of spot market price volatility.Finally, the research content of this paper to make a prospect. The author hopes that the development of derivatives market in the future can be an appropriate increase illiquid options contracts, to investors to spread knowledge of option, can gradually relax the role of investors trading restrictions, publicity derivatives in the market.