Published in:University of Miami Business School Research Paper ; No. 3505045
Extent:
1 Online-Ressource (76 p)
Language:
English
DOI:
10.2139/ssrn.3505045
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 17, 2019 erstellt
Description:
We examine whether the distribution of trades along the set of strike prices of option contracts on the same stock contains information about underlying price discovery. We show that option traders' demand for delta exposure drives the volume-weighted average strike-spot price ratio (VWKS). In turn, we find that VWKS predicts underlying returns and anticipates the flow of fundamental information about the stock. The return predictability is greater but not limited to stocks with higher information asymmetries and arbitrage costs, and becomes stronger ahead of value relevant news. Overall, options trading appears to play an important informational role for underlying markets