Correspondence: Yaffa Machnes, Graduate School of Business Administration, Bar-Ilan University, 52900 Israel. Tel: +972 8 9468544; Fax +972 3 5353182; E-mail: machny@mail.biu.ac.il

¹Yaffa Machnes is the director of the Graduate School of Business Administration at Bar-Ilan University in Israel. She graduated from the Hebrew University in Jerusalem and specialises in risk management and insurance. Her research has been published in several international journals including the Review of Economic Studies, the International Economic Review, Journal of Economic Behavior and Organization, Geneva Papers on Risk and Insurance and Insurance: Mathematics and Economics. She was consultant to the World Bank and served as an external director to Migdal pension fund, Mizrahi Bank mutual funds besides being a member of public committees in the Ministries of Finance and Justice.

Received 3 October 2005; Revised 3 October 2005.

Abstract

This paper expands on the existing literature about the predictive power of the trading volume of options for the future spot price of assets. It presents an empirical examination of the relationship between the trading volume of options for the Canadian dollar, the Swiss franc and the British pound and their exchange rates against the US dollar, 17 h after regular trading hours in Chicago. Except for the Canadian dollar, an additional day of trade distorts these relationships. At the same time, the exchange rate of the Japanese yen was less related to the options' volume of trade. It is seen that different currencies, which are traded in their homeland during different regular trading hours, are accordingly related to the options trading volume in Chicago.