O/S: The relative trading activity in options and stock
Abstract
Relatively little is known about the trading volume in derivatives relative to the volume in underlying stocks. We study the time-series properties and the determinants of the options/stock trading volume ratio (O/S) using a comprehensive cross-section and time-series of data on equities and their listed options. O/S is related to many intuitive determinants such as delta and trading costs, and it also varies with institutional holdings, analyst following, and analyst forecast dispersion. O/S is higher around earnings announcements, suggesting increased trading in the options market. Further, post-announcement absolute returns are positively related to pre-announcement O/S, which suggests that at least part of the pre-announcement options trading is informed.
Additional Information
© 2009 Elsevier B.V. Received 27 April 2009, Revised 13 June 2009, Accepted 23 June 2009, Available online 12 November 2009. We are grateful to the referee, Eugene Fama, for many helpful and constructive comments on previous drafts. Valuable comments were also received from Amber Anand, Tom Barkley, Steve Cauley, Bhagwan Chowdhry, Stuart Gabriel, Mark Garmaise, Bob Geske, Murali Jagannathan, Srinivasan Krishnamurthy, Hanno Lustig, Marc Martos-Vila, Milena Petrova, Pierre Yourougou, and participants in seminars at Syracuse University, UCLA, and at the annual meetings of the European Finance Association.Additional details
- Eprint ID
- 95187
- DOI
- 10.1016/j.jfineco.2009.11.004
- Resolver ID
- CaltechAUTHORS:20190502-140828653
- Created
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2019-05-03Created from EPrint's datestamp field
- Updated
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2021-11-16Created from EPrint's last_modified field