@article {Bhuyan85, author = {Rafiqul Bhuyan and Patricia A. Cheshier and Denver H. Travis}, title = {LEAPS of Faith: A Trading Indicator Based on CBOE S\&P 500 LEAPS Option Open Interest Information }, volume = {19}, number = {2}, pages = {85--94}, year = {2010}, doi = {10.3905/joi.2010.19.2.085}, publisher = {Institutional Investor Journals Umbrella}, abstract = {A long-standing debate has revolved around the question of whether information travels first to the stock market or to the stock options market. Using an open interest-based predictor calculated from CBOE S\&P 500 LEAPS options, we find evidence of strong predictive power from the options market on the underlying S\&P 500 index. This evidence is supported by out-of-sample tests of a simple trading strategy using the open interest-based predictor as a trading indicator. The authors illustrate the practical application of this strategy for an active manager using exchange-traded funds with a variety of leverage and shorting constraints. The trading indicator is also shown to be useful for a semi-active manager employing enhanced indexing techniques.TOPICS: Mutual fund performance, mutual funds/passive investing/indexing, exchange-traded funds and applications}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/19/2/85}, eprint = {https://joi.pm-research.com/content/19/2/85.full.pdf}, journal = {The Journal of Investing} }