Option Skills

50 Pages Posted: 29 Nov 2017 Last revised: 21 Apr 2020

See all articles by Amber Anand

Amber Anand

Syracuse University - Whitman School of Management

Jian Hua

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Andy Puckett

University of Tennessee, Knoxville

Date Written: April 8, 2020

Abstract

We contribute to the debate on whether institutional investors have an information advantage in a novel way – by investigating institutional options holdings. We find that net institutional option holdings predict both future abnormal stock returns and earnings surprises, particularly for stocks with more opaque public information environments. The return predictability in net option holdings stems from the negative information reflected in institutions’ put positions, and is orthogonal to other variables that may contain similar information (short interest and signed option trading imbalances). We find that institutions use put options as complements, rather than the often-posited substitute for short selling.

Keywords: Institutional Trading, Informed Traders, Options Markets

JEL Classification: G14, G20

Suggested Citation

Anand, Amber and Hua, Jian and Puckett, Andy, Option Skills (April 8, 2020). Available at SSRN: https://ssrn.com/abstract=3078061 or http://dx.doi.org/10.2139/ssrn.3078061

Amber Anand (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244
United States

Jian Hua

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Andy Puckett

University of Tennessee, Knoxville ( email )

437 Stokely Managment Center
Knoxville, TN 37996
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
10
Abstract Views
131
PlumX Metrics