Winning Probability of Selling Option on Crude Oil West Texas Intermediate

Abstract

Nescinece of the winning probability of selling option on crude oil West Texas Intermediate (WTI) may be one cause of lack of research on selling options whereas option on WTI trading on NYMEX now becomes one of the largest trading in the world. The study of selling option is much less than buying option, so that people are less familiar to selling option performance probability. This study aims to analyze winning probability of the monthly return of selling option on WTI. The monthly return of selling option premium data was analyzed by the Black Scholes Option Pricing Method using daily WTI price data ranging from April 1984 to May 2017. It employs the runs test as non parametric statistical and one-sample proportion test as parametric statistical method. Empirical results indicate that winning probability of selling option on WTI at the far out of the money strikes is better than at the in the money position strikes.

Keywords: Selling option, WTI, probability, randomness, proportion