Net Buying Pressure and Informed Trading in the Options Market: Evidence From Earnings Announcements
Date
Authors
Supervisor
Item type
Journal Article
Degree name
Journal Title
Journal ISSN
Volume Title
Publisher
MDPI AG
Abstract
By employing the modified net buying pressure as a measure of informed option trading, this study tested whether option trading around quarterly earnings announcements is either directionally motivated and/or volatility motivated. We found evidence that is consistent with the idea that option investors have private information prior to positive earnings announcements and use at-the-money options to exploit their informational advantage. In the post-event period, however, informed option investors trade by using deep-out-of-the-money and out-of-the-money options. We documented limited evidence on the volatility-motivated option trading, and our results suggest that this type of option trading could be motivated by hedging purposes only.Description
Source
Journal of Risk and Financial Management, 15(2), 53. https://doi.org/10.3390/jrfm15020053
Publisher's version
Rights statement
© 2022 by the authors.
Licensee MDPI, Basel, Switzerland.
This article is an open access article
distributed under the terms and
conditions of the Creative Commons
Attribution (CC BY) license (https://
creativecommons.org/licenses/by/
4.0/).