Informed options trading on the implied volatility surface: A cross-sectional approach
- Authors
- Kim, Baeho; Kim, Da-Hea; Park, Haehean
- Issue Date
- 5월-2020
- Publisher
- WILEY
- Keywords
- equity options; implied volatility surface; informed options trading; stock return predictability
- Citation
- JOURNAL OF FUTURES MARKETS, v.40, no.5, pp.776 - 803
- Indexed
- SSCI
SCOPUS
- Journal Title
- JOURNAL OF FUTURES MARKETS
- Volume
- 40
- Number
- 5
- Start Page
- 776
- End Page
- 803
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/56250
- DOI
- 10.1002/fut.22070
- ISSN
- 0270-7314
- Abstract
- This study investigates the cross-sectional implication of informed options trading across different strikes and maturities. We explore the term structure perspective of the one-way information transmission from options markets to stock markets by adopting well-known option-implied volatility measures to examine stock return predictability. Using equity options data for U.S. listed stocks spanning 2000-2013, we find that the shape of the long-term implied volatility curve exhibits extra predictive power for stock returns of subsequent months even after orthogonalizing the short-term components. Our findings indicate that the inter-market information asymmetry rapidly disappears before the expiration of long-term option contracts.
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Collections - Korea University Business School > Department of Business Administration > 1. Journal Articles
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