We show evidence of a liquidity searching behaviour of informed investors in option listings, which was also found by … find that the option bid-ask spread may be still a good proxy for informed trading, despite of the liquidity searching … traders avoid trading in initial periods after listing dates due to the low liquidity environment), which is steeper for …

volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to … using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … underlying market, as measured by the liquidity of the latter market. In a perfect hedge world, spreads arise from the …