RT Journal Article SR Electronic T1 LEAPS of Faith: A Trading Indicator Based on CBOE S&P 500 LEAPS Option Open Interest Information JF The Journal of Investing FD Institutional Investor Journals SP 85 OP 94 DO 10.3905/joi.2010.19.2.085 VO 19 IS 2 A1 Rafiqul Bhuyan A1 Patricia A. Cheshier A1 Denver H. Travis YR 2010 UL https://pm-research.com/content/19/2/85.abstract AB 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