Stealth trading in options markets
Abbreviated Journal Title
J. Financ. Quant. Anal.
STOCK-PRICES; EQUITY OPTIONS; VOLUME; INFORMATION; TRADES; VOLATILITY; DISCOVERY; LIQUIDITY; SIZE; Business, Finance; Economics
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 of Financial and Quantitative Analysis
"Stealth trading in options markets" (2007). Faculty Bibliography 2000s. 6829.