The delta- and vega-related information content of near-the-money option market trading activity

Thomas Rourke

Journal of Financial Markets, 2014, vol. 20, issue C, 175-193

Abstract: This paper evaluates the information content of trading activity in near-the-money option markets. The results provide compelling evidence consistent with hypotheses of delta- and vega-informed trading activity in near-the-money option markets for firms with actively traded near-the-money options. However, considerably less evidence in support of the same hypotheses is found for firms with thinly traded near-the-money options. Hence, both the delta- and vega-related information content of near-the-money option trading activity appear to be positively related to overall near-the-money option trading activity. Lastly, near-the-money option trading activity is, in general, more vega-informative than delta-informative.

Keywords: Option markets; Volatility trading; Price discovery (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:20:y:2014:i:c:p:175-193

DOI: 10.1016/j.finmar.2014.01.002

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