The Use of strategies regarding the nondirectional market and volatility expectation in the options: An empirical application on BIST

Options are contracts that endow the buyer with the right of purchasing or selling the underlying asset at a pre-determined price during a certain period of time or on a specific date. Option strategies that meet different expectations of market participants such as risk management and speculation are constructed through the simultaneous buy and sell of one or more option contracts that may vary in terms of strike price, maturity or option type. The objective of this study is to examine whether there is a significant difference between group of firms involved in the financial institutions sector and those which are not involved in that sector with regard to profit or loss that were obtained from neutral option strategies. In this context, option contracts that are traded in VIOP are divided into two groups based on the sectoral distinction in the Public Disclosure Platform. Then, the Mann Whitney U Test, which is one of the nonparametric tests, was applied to compare the two independent groups. The results of the study show that there is a statistically significant difference between the two groups in terms of high volatility expectancy strategies (except for the short butterfly strategy), and that there is a statistically significant difference between the two groups in terms of strategies for low volatility expectation (except for the long butterfly strategy). In addition, the results indicate that while strategies for non-directional market and high volatility expectation generally result in loss, and the amount of loss in the group of companies in financial institution sectors is lower; strategies for non-directional market and low volatility expectations are generally profitable and the amount of profit that has been obtained is higher in the group of companies which are not included in financial institution sectors.