This paper examines the price effect of option introduction from 1974 to 1980. The introduction of individual options causes a permanent price increase in the underlying security, beginning approximately three days before introduction. The price effect appears to be associated with introduction, and not announcement, throughout the sample period. Excess returns volatility declines with option introduction. Systematic risk is unchanged, there is a positive relation between the price increase and a measure of activity in the options market. Copyright 1989 by American Finance Association.
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Article provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 44 (1989) Issue (Month): 2 (June) Pages: 487-98 Download reference. The following formats are available: HTML,
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