Informed option trading and stock market mispricing

Informed option trading and stock market mispricing
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The Information in Option Volume for Future Stock Prices

The market gave us a rare gift. but a well-informed group of traders is a huge edge. but it was always an option to short the common stock. The trade was just a simple long near $24 that

Informed option trading and stock market mispricing
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Information Content of Implicit Spot Prices Embedded in

Market makers are able to calculate their cost of participating in option trading by using interest rate plays. In other words, using his own appropriate interest rate, the market maker will calculate his cost to derive the size of the debit or credit that would make a commodity or stock trade profitable.

Informed option trading and stock market mispricing
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Informed Trading in Options or Price Pressure in Stocks

Highlights We examine the reaction of the option market to stock mispricing. We study the price equilibrium between the stock and option markets. The price divergence increases in stock mispricing. The option boundary violations are interacted with stock mispricing. The results are evidence of informed trading by options traders.

Informed option trading and stock market mispricing
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Journal of Financial Economics 12 (1983) 161-185. North

Do Futures and Options trading increase stock market volatility? market depth and reduce volatility because the cost to informed traders of responding to mispricing is reduced. Froot and Perold(1991) extend Kyle’ s(1985) model to show that market depth is Nathan Associates (1974) found that the trading volume did not change with

Informed option trading and stock market mispricing
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Seaspan Corp. - 1 Stock, 3 Opportunities, 3 Winning Trades

or speculating activities in the futures markets add more informed traders to the stock market, thereby increasing the liquidity and decreasing the volatil- since the cost responding to mispricing is reduced for informed traders. In another study, and options trading on the market indices.

Informed option trading and stock market mispricing
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Apple Stock Trading Lower | The Stock Market Info

The U.S. stock market has become a complex of interconnected exchanges and off-exchange markets. Show abstract. Informed Option Trading and Stock Market Mispricing. We argue that the

Informed option trading and stock market mispricing
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22 The Relationship between Liquidity and Market

option market is usually more liquid and thus imposes lower trading costs. Thus, the RNS implied by short-term options deviates away from the expected skewness of the underlying stock by impounding informed trades in the short-term option market

Informed option trading and stock market mispricing
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CiteSeerX — Informed Trading in Stock and Option Markets

where ν is the fraction of informed investors trading in a stock and/or an option with a quoted spread of zero, Quoted Spread is a proxy for stock liquidity and ω is a positive variable describing the relationship between the presence of informed investors and the quoted spread.

Informed option trading and stock market mispricing
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Do Futures and Options trading increase stock market

Economic News and Stock Market Linkages - the Evidence from the U.S., U.K., and Japan. In Proceedings of the Second Joint Central Bank Research Conference on …

Informed option trading and stock market mispricing
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Hide and seek: uninformed traders and short-sales constraints

specific risk reflect greater participation of informed traders in the market for the stock. However, I also find that mispricing increases with idiosyncratic volatility for highly volatile stocks, and this is attributed to both noise trading and arbitrage risk.

Informed option trading and stock market mispricing
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Trading volume: NASDAQ and the NYSE | Request PDF

trading has been widely considered (Glosten and Milgrom, 1985; Kyle, 1985), in our setting the informed trader is the manager conducting open market share repurchases. Our analysis focuses on a particular motive underlying share repurchases that has been highlighted in the literature—as a

Informed option trading and stock market mispricing
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Deviations from Put-Call Parity and Stock Return

Based on five years of stock and options data for 60 firms, we estimate the option market's contribution to price discovery to be about 17% on average. Option market price discovery is related to trading volume and spreads in both markets, and stock volatility.

Informed option trading and stock market mispricing
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Does Option Implied Volatility Predict Stock Returns?

Chin-Han Chiang, Sung Gon Chung and Henock Louis, Insider trading, stock return volatility, and the option market's pricing of the information content of insider trading, Journal of …

Informed option trading and stock market mispricing
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14.pdf | Market Liquidity | Option (Finance) - Scribd

market who receive orders from option market makers attempting to hedge—if price discovery occurs in the option market, then hedging demand by option market makers may represent an indirect type of …

Informed option trading and stock market mispricing
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Rational Investor Behaviour and Market Mispricing The

I examine the informational efficiency of stock markets by testing the relation between idiosyncratic volatility and equity mispricing. I find that the level of mispricing declines with idiosyncratic volatility consistent with the notion that greater levels of firm-specific risk reflect greater participation of informed traders in the market for the stock.

Informed option trading and stock market mispricing
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Market efficiency and hedge fund trading strategies

changes in option volume, indicating that that informed trading is likely taking place in option markets and moving option prices before being captured in stock markets. Other related studies focus on predicting option returns, option trading volume, or the option

Informed option trading and stock market mispricing
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What Is A Collar Option Trade: Most Reliable 60 Seconds

option market informed trading price discovery transaction data order imbalance efficient price sixty stock stock market berkeley option data base market share individual firm implied efficient price temporary component random-walk component temporary mispricing observed price information share much price discovery time-series variation

Informed option trading and stock market mispricing
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Introduction of Futures and Options on a Stock Index and

Insider Trading after Repurchase Tender Offer Announcements: Timing versus Informed Trading Henock Louis, Amy X. Sun, and Hal White∗ Abnormally high net insider selling is commonly observed after repurchase tender offer (RTO)

Informed option trading and stock market mispricing
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Informed Trading, Liquidity Provision, and Stock Selection

Additionally, if some informed investors trade in option markets before trading in the underlying stock, option prices might predict future stock price movements. Indeed, this study finds that changes in option implied volatilities are correlated with subsequent stock returns.