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Forecasting option spreads: The use of multiple listing

Advances in Business and Management Forecasting

ISBN: 978-0-7623-1478-2, eISBN: 978-0-85724-787-2

Publication date: 30 April 2008


We propose a novel method of forecasting equity option spreads using the degree of multiple listing as a proxy for expectations of future spreads. Spreads are a transactions fee for traders. To determine the future spreads on options being considered for purchase, traders must take current market trends affecting spreads into account. One such trend is the continued decline in spreads due to the multiple listing of options. Options listed on 4–6 exchanges compete more intensely than those listed on fewer exchanges, so that they may be expected to experience greater future declines in spreads. This study identifies the listing dates and number of listed exchanges for options listed on up to six exchanges as of May 2005. Listing criteria for multiple listing are defined with short- and long-term volumes, market capitalization, net income, and total assets being significant determinants of multiple listing. Short- and long-term volumes were found to have no explanatory power for multiple listing. Ranges of listing criteria are specified so that traders may locate the options of their choice.


Abraham, R. and Harrington, C.W. (2008), "Forecasting option spreads: The use of multiple listing", Lawrence, K.D. and Geurts, M.D. (Ed.) Advances in Business and Management Forecasting (Advances in Business and Management Forecasting, Vol. 5), Emerald Group Publishing Limited, Bingley, pp. 47-63.



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