Volatility Information Trading in the Option Market¶
Bibliographic record. Follow the original-source link for the publication.
| Field | Value |
|---|---|
| Primary domain | Volatility |
| Other domains | Microstructure |
| Methods | — |
| Facets | Instrument Single Stock Options |
| Authors | SOPHIE X. NI, JUN PAN, ALLEN M. POTESHMAN |
| Published | 2008-05-09 |
| Source | The Journal of Finance |
| Identifiers | doi:10.1111/j.1540-6261.2008.01352.x |
| URL | Open original source |
Editorial synthesis¶
Why it matters¶
The study tests whether option-market volatility demand contains information about future realized volatility and how its price impact changes with information asymmetry around earnings. (abstract:S1, abstract:S2, abstract:S3, abstract:S4)
Main author claims¶
- The authors construct non-market-maker net demand for volatility from individual-equity option volume and report that it is informative about future realized volatility of the underlying stocks. (
abstract:S1,abstract:S2) - The authors report a positive impact of volatility demand on option prices. (
abstract:S3) - The authors report that price impact rises by 40% as volatility information asymmetry intensifies before earnings announcements and returns toward its usual level after uncertainty is resolved. (
abstract:S4)
Data, method, or discussion scope¶
The material covers volume-based volatility demand in individual-equity options, future realized volatility, option-price impact, and time variation around earnings announcements. (abstract:S1, abstract:S2, abstract:S3, abstract:S4)
Main limitations¶
The abstract gives no sample period, demand-construction details, controls, or identification design; the positive price impact and earnings-cycle variation are reported empirical relationships, not evidence by themselves of causality or net trading profits. (abstract:S2, abstract:S3, abstract:S4)