The effect of option transaction costs on informed trading in the options market around earnings announcements

2020 ◽  
Vol 47 (5-6) ◽  
pp. 615-644
Author(s):  
Suresh Govindaraj ◽  
Yubin Li ◽  
Chen Zhao
Keyword(s):  
Transaction Costs ◽  
Earnings Announcements ◽  
Informed Trading ◽  
Options Market

Dividend Initiations, Information Content, Informed Trading in the Options Market and Stock Liquidity

2015 ◽  
Author(s):  
Balasingham Balachandran ◽  
Huu Nhan Duong ◽  
Michael Theobald ◽  
Yun (Tracy) Zhou
Keyword(s):  
Information Content ◽  
Informed Trading ◽  
Options Market ◽  
Stock Liquidity ◽  
Dividend Initiations

Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements

2016 ◽  
Author(s):  
Priyantha Mudalige ◽  
Petko S. Kalev ◽  
Kartick Gupta ◽  
Huu Nhan Duong
Keyword(s):  
Earnings Announcements ◽  
Informed Trading

scholarly journals Determinants of Violations in the SET50 Index Options Pricing Relationships: Put-Call-Futures Parity and Box Spread Tests

2018 ◽  
Vol 14 (3) ◽  
pp. 1 ◽  
Author(s):  
Woradee Jongadsayakul
Keyword(s):  
Transaction Costs ◽  
Risk Premium ◽  
Tobit Model ◽  
Options Pricing ◽  
Options Market ◽  
Index Options ◽  
Exercise Price ◽  
Daily Data ◽  
Before And After ◽  
Contract Specification

Although SET50 Index Options, the only option product on Thailand Futures Exchange, has been traded since October 29, 2007, it has faced the liquidity problem. The SET50 Index Options market must offer a risk premium to compensate investors for liquidity risk. It may cause violations in options pricing relationships. This research therefore uses daily data from October 29, 2007 to December 30, 2016 to compare the violations in SET50 Index Options pricing relationships before and after change in contract specification on October 29, 2012 and investigate determinants of these violations using Tobit model. Two tests of SET50 Index Options pricing relationships, Put-Call-Futures Parity and Box Spread, are employed. The test results of Put-Call-Futures Parity show that the percentage and baht amount of violations in many cases are greater in the period before the modification of SET50 Index Options. Without transaction costs, we also see more Box Spread violations before contract adjustment. However, after taking transaction costs into account, there are more percentage and baht amount of Box Spread violations in the later time period. The estimation of Tobit model shows that the violation sizes of both Put-Call-Futures Parity and Box Spread, excluding transaction costs, depend on the liquidity of SET50 Index Options market measured by option moneyness and open interest. The SET50 Index Options contract specification, especially exercise price, also significantly affects the size of violations, though the direction of a relationship is not cleared.

Informed Trading in Corporate Bonds Prior to Earnings Announcements

2016 ◽  
Vol 45 (3) ◽  
pp. 641-674 ◽  
Author(s):  
Jason Wei ◽  
Xing Zhou
Keyword(s):  
Corporate Bonds ◽  
Earnings Announcements ◽  
Informed Trading

Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements

2017 ◽  
Author(s):  
Priyantha Mudalige ◽  
Petko S. Kalev ◽  
Kartick Gupta ◽  
Huu Nhan Duong
Keyword(s):  
Earnings Announcements ◽  
Informed Trading

Informed Trading in Corporate Bonds Prior to Earnings Announcements

2012 ◽  
Author(s):  
Jason Zhanshun Wei ◽  
Xing Zhou
Keyword(s):  
Corporate Bonds ◽  
Earnings Announcements ◽  
Informed Trading

Informed Trading Around Earnings Announcements: Another Look

2004 ◽  
Vol 39 (3) ◽  
pp. 409-434
Author(s):  
Dennis J. Whalen ◽  
Charles D. Collver
Keyword(s):  
Earnings Announcements ◽  
Informed Trading

Firm opacity and informed trading around spinoffs

2018 ◽  
Vol 19 (3) ◽  
pp. 262-276 ◽  
Author(s):  
Yuan Wen
Keyword(s):  
Stock Returns ◽  
Design Methodology ◽  
Informed Trading ◽  
Options Market ◽  
Organizational Complexity ◽  
Content Type ◽  
Abnormal Stock Returns ◽  
Options Trading ◽  
The Relationship ◽  
Corporate Spinoffs

Purpose This paper aims to examine the prevalence of informed trading around corporate spinoffs and the relation between firm opacity and informed trading using option market data. Design/methodology/approach The author investigates the prevalence of informed trading by examining the relationship between abnormal stock returns associated with spinoffs and the volatility spread/volatility skewness of options prior to the spinoffs. Furthermore, the author examines how opacity and organizational complexity prior to the spinoffs affect informed trading. Findings The study shows that option volatility spread and volatility skewness for the five days prior to the spinoffs can predict the abnormal stock returns on the spinoff announcement days, suggesting that there is informed trading in the options market prior to spinoffs. The study shows that informed trading is more prevalent for firms that are more opaque prior to the spinoff. Furthermore, informed trading decreases after spinoffs. Originality/value To the best of knowledge, this is the first empirical research that examines the prevalence of informed trading around spinoffs by using options volatility spread/skewness and the relation between firm opacity and informed options trading.

Investor attention and stock market under-reaction to earnings announcements: Evidence from the options market

2017 ◽  
Vol 38 (4) ◽  
pp. 478-492 ◽  
Author(s):  
Xuewu Wesley Wang ◽  
Zhipeng Yan ◽  
Qunzi Zhang ◽  
Xuechen Gao
Keyword(s):  
Stock Market ◽  
Earnings Announcements ◽  
Options Market ◽  
Investor Attention
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