Title

Stealth trading in options markets

Authors

Authors

A. Anand;S. Chakravarty

Comments

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Abbreviated Journal Title

J. Financ. Quant. Anal.

Keywords

STOCK-PRICES; EQUITY OPTIONS; VOLUME; INFORMATION; TRADES; VOLATILITY; DISCOVERY; LIQUIDITY; SIZE; Business, Finance; Economics

Abstract

We investigate how price discovery occurs in the options markets through traders' trade size choice. By employing transactions data on all options traded on a sample of 100 firms, we show that informed traders fragment their orders into small (medium) trades for low (high) volume contracts. We also find that almost 60% of the price discovery occurs in the exchange with the largest market share for a given option, where informed traders favor medium size trades. Upon examining distinct option series for a given stock, we find that at-the-money calls display the highest information share.

Journal Title

Journal of Financial and Quantitative Analysis

Volume

42

Issue/Number

1

Publication Date

1-1-2007

Document Type

Article

Language

English

First Page

167

Last Page

187

WOS Identifier

WOS:000244843900007

ISSN

0022-1090

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