Information and the arrival rate of option trading volume

Mengyu Zhang (1) , Thanos Verousis (2) , Iordanis Kalaitzoglou (3)

1 Kent Business School, University of Kent
2 University of Essex
3 Audencia Business School

In this paper we investigate the interaction between liquidity and information in the options market and its impact on the pricing of the underlying asset. We model option trade duration and volume jointly, for the first time, as a natural measure of options' trading intensity and we associate it with differential degrees of information present in option trades. We report a highly significant association between option trading intensity with contemporaneous and future underlying volatility and returns, which is robust to the presence of other information measures, market factors and structural forms.

Mots clés: Options; stocks; trading volume; liquidity; information; conditional duration

Domaines: Economies et finances

Mengyu Zhang, Thanos Verousis, Iordanis Kalaitzoglou. Information and the arrival rate of option trading volume. Journal of Futures Markets, In press. ⟨hal-03648997⟩