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

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  • Rourke, Thomas

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.

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  • Rourke, Thomas, 2014. "The delta- and vega-related information content of near-the-money option market trading activity," Journal of Financial Markets, Elsevier, vol. 20(C), pages 175-193.
    • Handle: RePEc:eee:finmar:v:20:y:2014:i:c:p:175-193
    DOI: 10.1016/j.finmar.2014.01.002
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    Cited by:

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    2. Lin, William T. & Tsai, Shih-Chuan & Zheng, Zhenlong & Qiao, Shuai, 2018. "Retrieving aggregate information from option volume," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 220-232.
    3. Lee, Jaeram & Lee, Geul & Ryu, Doojin, 2018. "Difference in the intraday return-volume relationships of spots and futures: A quantile regression approach," Economics Discussion Papers 2018-68, Kiel Institute for the World Economy (IfW Kiel).
    4. Kaeck, Andreas & van Kervel, Vincent & Seeger, Norman J., 2022. "Price impact versus bid–ask spreads in the index option market," Journal of Financial Markets, Elsevier, vol. 59(PA).
    5. Ryu, Doojin & Yang, Heejin, 2019. "Who has volatility information in the index options market?," Finance Research Letters, Elsevier, vol. 30(C), pages 266-270.
    6. Lee, Jaeram & Ryu, Doojin & Yang, Heejin, 2021. "Does vega-neutral options trading contain information?," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 294-314.
    7. Lin, William T. & Tsai, Shih-Chuan & Zheng, Zhenlong & Qiao, Shuai, 2017. "Does options trading convey information on futures prices?," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 182-196.

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    More about this item

    Keywords

    Option markets; Volatility trading; Price discovery;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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