Research Question 3: Taker Orders

• Research Question 3: Taker Orders
  • Summary
  • Visualized Overview of Generated Data
  • Result
  • Visualization of Statistical Summary
    • Nikkei Future
    • TOPIX Future
    • JGBL Future

Summary

• I measured taker orders' activity by it'S aggregated unrealized profit, volume and profitability of their position at maturity on each tick
• Products that I analyzed are Nikkei 225, TOPIX and Japanese Government Bond Future; For Nikkei 225 and TOPIX, mini variant included with appropriate weight.
• I grouped each data points by how the market moved in next 3600 seconds.
• Statistical summary reveals that underlying distribution of data points are different prior to market move

Visualized Overview of Generated Data

Below plot is the visualization of generated data.

• Reference Price
  Reference price tracks the execution price of the future contract.

• Signal

  This is a categorical value that takes one of 3 value.

  Value	Condition
  Buy	If you buy the contract at ask price, you can turn X point of profit by selling at bid price in next 3600 seconds
  Sell	If you sell the contract at bid price, you can turn X point of profit by selling at ask price in next 3600 seconds
  Timeout	None of the condition were met.

• Profit at Maturity Measured Against Reference Price
  This tracks taker's profit at maturity, it uses reference price as hypothetical final settlement price.

  Say, in last T seconds, we observed following transactions.

  Product	Taker's Side	Quantity	Strike Price	Transaction Price	Transaction Time
  Future	Buy	10	---	19,900	10:00
  Mini Future	Sell	10	---	20,100	11:00
  Call option	Buy	10	20,000	500	10:30
  Put option	Sell	10	20,000	300	10:25

  When the reference price is 20,000JPY, value at maturity would be,

  Moneyness	Future	Mini Future	Call option	Put option
  -3% (19,400)	-5,000	700	-5,000	-3,000
  -2%(19,600)	-3,000	500	-5,000	-1,000
  -1%(19,800)	-1,000	300	-5,000	1,000
  0%(20,000)	1,000	100	-5,000	3,000
  1%(20,200)	3,000	-100	-3,000	3,000
  2%(20,400)	5,000	-300	-1,000	3,000
  3%(20,600)	7,000	-500	1,000	3,000

• Profit at Maturity Measured Against Reference Price un-weigted by volume

  Say, in last T seconds, we observed following transactions (same as the previous example).

  Product	Taker's Side	Quantity	Strike Price	Transaction Price	Transaction Time
  Future	Buy	10	---	19,900	10:00
  Mini Future	Sell	10	---	20,100	11:00
  Call option	Buy	10	20,000	500	10:30
  Put option	Sell	10	20,000	300	10:25

  When the reference price is 20,000JPY, value at maturity would be,

  Moneyness	Future	Mini Future	Call option	Put option
  -3% (19,400)	-500	70	-500	-300
  -2%(19,600)	-300	50	-500	-100
  -1%(19,800)	-100	30	-500	100
  0%(20,000)	100	10	-500	300
  1%(20,200)	300	-10	-300	300
  2%(20,400)	500	-30	-100	300
  3%(20,600)	700	-50	100	300

• Aggregated volume

  This is the aggregated volume within a time window.

• Number of executions

  This tracks the number of executions observed.

• Unrealized Profit

  Say, in last T seconds, we observed following transctions (same as the previous example).

  Product	Taker's Side	Quantity	Strike Price	Transaction Price	Transaction Time
  Future	Buy	10	---	19,900	10:00
  Mini Future	Sell	10	---	20,100	11:00
  Call option	Buy	10	20,000	500	10:30
  Put option	Sell	10	20,000	300	10:25

  Unrealized gains at given best bid/ask is;

  Product	unrealized gains	best bid	best ask
  Future	11,000	21,000	21,100
  Mini Future	9,000	21,000	21,100
  Call option	10,000	1,500	1,700
  Put option	10,000	100	200

• Unrealized Profit (Un-Weigted by Volume)

  Say, in last T seconds, we observed following transactions (same as the previous example).

  Product	Taker's Side	Quantity	Strike Price	Transaction Price	Transaction Time
  Future	Buy	10	---	19,900	10:00
  Mini Future	Sell	10	---	20,100	11:00
  Call option	Buy	10	20,000	500	10:30
  Put option	Sell	10	20,000	300	10:25

  Unrealized gains at given best bid/ask is;

  Product	unrealized gains	best bid	best ask
  Future	1,100	21,000	21,100
  Mini Future	900	21,000	21,100
  Call option	1,000	1,500	1,700
  Put option	1,000	100	200

Result

I calculated the summary statistics of each variables after grouping each data points by it's signal. Data is normalized by,

• converting each data point into percentile changes of it's previous data.

  e.g.

  	after	original data
  0	nan	10
  1	0.1	11
  2	-0.181818	9

• removing outliers

  Any data point that is not between 1% ~ 99% percentile is filtered.

• removing data points that did not change

  There were many data point which did not change from the previous value. Any data point that is 0 is removed.

To sum up, I can say the following for each variable;

• Skew, Kurtosis
  • For most variables, Skew of Timeout group is somewhere around 0, while skew of Buy/Sell group shows more variance.
• Mean, Variance, 1st percentile and 99th percentile
  • Buy/Sell group tends to be close to 0
  • Some Timeout groups have larger/smaller value
• Product Difference
  • NK225
    Compared to other products, Buy/Sell and Timeout has less overlap.
    It can be said that this is coming from it's Japan's most active options market.
  • JGBL
    Overlap between Timeout group and others are more significant on JGBL, I'm suspecting that this is due to the smaller number of taker orders.
  • TOPIX
    TOPIX's variable looks less scattered, this is coming from the lack of activity in it's options space.
    Option related variables are removed.

Here is a plot that shows the aggregate of statistical summary of the data for each product.
From left we have skew, kurtosis, variance, mean, 1% percentile and 99% percentile of the data.

The title tells you the parameter. For example, the first row says "NK225: window = 60 secs, signal_size = 50.0 JPY". This means, the plot uses Nikkei 225 future data, with window size of 60 seconds, and signal size of 50 JPY.

Visualization of Statistical Summary

Nikkei Future

TOPIX Future

JGBL Future