A crowded trade emerges when speculators' positions are large relative to the asset's liquidity, making exit difficult. We study this problem of recent regulatory concern by focusing on short-selling. We show that days to cover (DTC), the ratio of short interest to trading volume, measures the...

We find that the demand for stock options that increases exposure to the underlying is positively related to the individual investor sentiments and past market returns, whereas the demand for index options is invariant to these factors. These differences in trading patterns are also reflected in...

This paper presents striking evidence that option trading changes the prices of underlying stocks. In particular, we show that on expiration dates the closing prices of stocks with listed options cluster at option strike prices. On each expiration date, the returns of optionable stocks are...

Under very weak assumptions, the expected returns of European call options must be positive and increasing in the strike price. This paper investigates the returns to call options on individual stocks that do not have an ex-dividend day prior to expiration. The main findings are that over the...

The question of whether and to what extent option trading impacts underlying stock prices has been of interest since options began exchange-based trading in 1973. Recent research presents evidence of an informational channel through which option trading impacts stock prices by showing that...

We examine the interaction between price discovery in banned stocks and the trading and prices of options and CDS during the 2008 short sale ban. We find that among banned stocks, stocks with high open purchased put-call ratios, low synthetic to stock price ratios, or high CDS percentage change...

Under very weak assumptions, the expected returns of European call options must be positive and increasing in the strike price. This paper investigates the returns to call options on individual stocks that do not have an ex-dividend day prior to expiration. The main findings are that over the...

Under very weak assumptions, the expected returns of European call options must be positive and increasing in the strike price. This paper investigates the returns to call options on individual stocks that do not have an ex-dividend day prior to expiration. The main findings are that over the...

We find that the demand for stock option positions that increase exposure to the underlying is positively related to measures of investor sentiment and past market returns, while the demand for index options is invariant to these factors. These differences in trading patterns are reflected in...