Information Content of Non-price Variables in the Options Market

In a study to determine the information content and predictive capacity of the nonprice variables in the options market in India, certain predictors are modeled using EGARCH framework. Relative content of information of two non-price variables in call and put options contracts was separately measured and ranked. Besides, spillover effects, persistence levels and asymmetric behavior of volatility are studied. Options volume and open interest carry information about the future direction of the underlying market. Call option volume followed by call option open interest predictors possess significant explanatory power to predict future spot prices for most of the cases.