Price discrimination against retail Investors: Evidence from mini options

Yubin Li, Chen Zhao and Zhaodong Zhong

Journal of Banking & Finance, 2019, vol. 106, issue C, 50-64

Abstract: This paper studies the rise and fall of “Mini” options that are especially catered to retail investors for popular but high-priced securities. Using transaction-level data, we find that transaction costs of Mini options are much higher than those of standard options and the difference cannot be fully explained by cost-related determinants. Furthermore, we find evidence of price discrimination against retail investors from analyses of price elasticities of option traders, an event-study of changes in bid-ask spreads around earnings announcements, and comparisons of trade prices paid by Mini and standard option traders for the same security at approximately the same time.

Keywords: Options; Retail investors; Price discrimination; Liquidity; Earnings announcements (search for similar items in EconPapers)
JEL-codes: D23 G10 G12 G13 G23 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:106:y:2019:i:c:p:50-64

DOI: 10.1016/j.jbankfin.2019.05.012

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