We find evidence that executives use private information in exercising stock options. The most informed executives exercise early, exercise after the vest date rather than at the vest date, do not exercise in anticipation of dividends, exercise a high percentage of their options, sell a large...

In spite of what appears to be widespread knowledge of option pricing theory, there remain some subtle points that are not well-known. For example, option prices are not always directly related to volatility, and risk-neutral investors, if they really existed, would be driven from the market by...

Although most financial market anomalies have been studied in securities markets, the options market has shown evidence of its own anomaly in the performance of covered calls on the S&P 500. This finding is puzzling in that this index is clearly a zero-alpha investment with very high volume...

This paper evaluates the underperformance of individual equity options relative to their replicating portfolios. Considering a high-dimensional set of variables, we use a machine learning approach to identify the characteristics of options and their underlying stocks that provide incremental...

This paper derives accurate inferences about the contribution of a high-dimensional set of option and stock characteristics to the cross-sectional variation in delta-hedged option returns. Unlike the extant literature that is largely focused on the construction of predictive models, we apply...