Net buying pressure and informed trading in the options market: Evidence from earnings announcements

Artikel

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 15 ; Year: 2022 ; Issue: 2 ; Pages: 1-9 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Contingent Pricing; Futures Pricing; option pricing ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: earnings ; announcements ; options ; informed trading ; net buying pressure ; volatility ; direction ; at-the-money ; out-of-the-money ; deep-out-of-the-money

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Badshah, Ihsan Ullah ; Koerniadi, Hardjo
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2022

Further information

• DOI: doi:10.3390/jrfm15020053
• Handle: http://hdl.handle.net/10419/258777
• Last update: 10.03.2025, 11:41 AM CET