Monetizing Economic Event Driven Intraday Range Anomalies: Quantitative Finance Research Report

This study explores the effect of economic events on the intraday range of the S&P500 and attempts to monetize the recent introduction of 0DTE options and the surge in options trading volumes.

Nov 29, 2023

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Abstract

Macro-economic data holds substantial importance for many market participants. This paper examines the influence of economic events on the intraday highs and lows of the S&P500 to uncover insights for a potential monetization strategy.

By analyzing data from 2008 to 2023, my study identifies 64 recurring economic data releases that exhibit statistically significant dislocations in the intraday range on the day of their release. Combining the analysis results with Bayesian methods enables a method of predicting the intraday range. This all culminates into a proposed monetization framework.

While the results show statistical significance, this paper refrains from conclusively deeming these findings as significantly impactful. This research contributes to the ongoing dialogue on leveraging economic event data for financial strategies, emphasizing the need for continued scrutiny and refinement in the pursuit of effective monetization approaches.

Introduction

In the dynamic landscape of financial markets, the realm of options trading is experiencing an unprecedented surge, with options volume reaching all-time highs. Previous studies show that this surge is linked with the escalating trend of retail trading creating a phenomenon that is reshaping the traditional landscape of financial markets. The evolving nature of retail trading opens new opportunities for monetization strategies that may capitalize on the growing trend.

Recognizing the potential opportunity to capitalize on the short-term nature of retail trading behavior, understanding and harnessing the impact of economic events on intraday price movements becomes paramount. This report employs various statistical analyses to dissect the relationship between the intraday range and the effect from the recurring macroeconomic events. By identifying which economic events are correlated with intraday high and low dislocations, one can gain a statistical information edge.

And as an added dimension to the analysis, this report transforms the key findings to create a potential monetization framework.

In subsequent sections, I will detail observations of retail trading behavior, present statistical analysis methodology, show key findings, propose a monetization strategy derived from the research, and discuss the nuanced influence of economic events on intraday range dislocations. This report aims to equip market participants with a further understanding of the multifaceted forces of macroeconomic events shaping key indices, providing both insights and actionable strategies based on historical data for navigating the ever-evolving financial landscape.