O/S: The relative trading activity in options and stock

Richard Roll, Eduardo Schwartz and Avanidhar Subrahmanyam

Journal of Financial Economics, 2010, vol. 96, issue 1, 1-17

Abstract: Relatively little is known about the trading volume in derivatives relative to the volume in underlying stocks. We study the time-series properties and the determinants of the options/stock trading volume ratio (O/S) using a comprehensive cross-section and time-series of data on equities and their listed options. O/S is related to many intuitive determinants such as delta and trading costs, and it also varies with institutional holdings, analyst following, and analyst forecast dispersion. O/S is higher around earnings announcements, suggesting increased trading in the options market. Further, post-announcement absolute returns are positively related to pre-announcement O/S, which suggests that at least part of the pre-announcement options trading is informed.

Keywords: Options; Stock; Trading; volume; Information (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (118)

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