Detecting Informed Trading Activities in the Options Markets

Marc Chesney, Remo Crameri and Loriano Mancini
Additional contact information
Marc Chesney: University of Zurich and Swiss Finance Institute
Remo Crameri: University of Zurich and Swiss Finance Institute (Ph.D Program)
Loriano Mancini: Geneva Finance Research Institute and FINRISK

No 11-42, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place more in put than call options, generates easily large gains exceeding millions, is not contemporaneously reflected in the underlying stock price, involves around the money options during calm times and out-of-the-money options during turbulent times. These findings are not driven by false discoveries in informed trades which are controlled using multiple hypothesis testing techniques.

Keywords: Options Trades; Open Interest; Informed trading; False Discovery Rate (search for similar items in EconPapers)
JEL-codes: C61 C65 G12 G13 G14 G17 G34 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2011-09
New Economics Papers: this item is included in nep-mst
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1522157 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1142

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().