Stealth trading in options markets

Amber Anand, Sugato Chakravarty

Research output: Contribution to journalArticle

61 Citations (Scopus)

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. COPYRIGHT 2007, SCHOOL OF BUSINESS ADMINISTRATION.

Original languageEnglish (US)
Pages (from-to)167-188
Number of pages22
JournalJournal of Financial and Quantitative Analysis
Volume42
Issue number1
StatePublished - Mar 2007
Externally publishedYes

Fingerprint

Options markets
Stealth trading
Informed traders
Trade size
Price discovery
Business Administration
Market share
Traders
Information share
Transaction data

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Stealth trading in options markets. / Anand, Amber; Chakravarty, Sugato.

In: Journal of Financial and Quantitative Analysis, Vol. 42, No. 1, 03.2007, p. 167-188.

Research output: Contribution to journalArticle

Anand, Amber ; Chakravarty, Sugato. / Stealth trading in options markets. In: Journal of Financial and Quantitative Analysis. 2007 ; Vol. 42, No. 1. pp. 167-188.
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