Net Buying Pressure and Informed Trading in the Options Market: Evidence from Earnings Announcements

Autor: Ihsan Badshah, Hardjo Koerniadi
Rok vydání: 2022
Předmět:
Zdroj: Journal of Risk and Financial Management; Volume 15; Issue 2; Pages: 53
ISSN: 1911-8074
DOI: 10.3390/jrfm15020053
Popis: By employing the modified net buying pressure as a measure of informed option trading, this study tested whether option trading around quarterly earnings announcements is either directionally motivated and/or volatility motivated. We found evidence that is consistent with the idea that option investors have private information prior to positive earnings announcements and use at-the-money options to exploit their informational advantage. In the post-event period, however, informed option investors trade by using deep-out-of-the-money and out-of-the-money options. We documented limited evidence on the volatility-motivated option trading, and our results suggest that this type of option trading could be motivated by hedging purposes only.
Databáze: OpenAIRE