We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place...

This appendix extends the empirical results in Chesney, Crameri, and Mancini (2011). Informed trading activities on put and call options are analyzed for 19 companies in the banking and insurance sectors from January 1996 to September 2009. Our empirical findings suggest that certain events such...

The financial crisis of 2008 had many putative causes. Psychology was an important driver for human decisions underlying these causes. However, quantitative financial models have no “knobs” to dial psychology parameters, and so arguably cannot possibly cope with financial crises. We have no...

Using the next-day and next-week returns of stocks in the Korean market, we examine the association of option volume ratios - i.e. the option-to-stock (O/S) ratio, which is the total volume of put options and call options scaled by total underlying equity volume, and the put-call (P/C) ratio,...

We present effective momentum strategies over the liquid equity futures market in India. We evaluate and determine the persistence of the returns at various look-backs ranging from quarterly and weekly to more granular look-backs. We look at a universe of the liquid equity instruments traded...

During the last decade, markets for covered warrants (bank-issued options) have flourished in Europe and Asia. In these markets, investors often face a choice between many instruments that differ only slightly from each other. Based on retail trades in call options on the German DAX index, this...

This paper examines how the investors' expectations of the stock market evolve over the ten-year period between 1999 to 2008. In the past decade, the U.S. stock market experienced two major crises, with a relatively steady growth period in between. Using options implied risk neutral...

Standard deviations of the volatility premium, of implied volatility innovations, and of the volatility term structure spread in equity options help explain the cross-section of one-month-ahead underlying stock returns. The explanatory power from standard deviations is robust to the levels of...

This paper documents that options held from one expiration date to the next achieve significantly lower returns when there are four versus five weeks between expiration dates. The average return differential ranges from 12 basis points per week for delta-hedged put portfolios to 89 basis points...

Behavioral theories contend that the human decision-making process tends to both incorporate anchor points and improperly weight low probability events. In this study, we find evidence that equity option market investors anchor to prices and incorporate a probability weighting function similar...