Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262360 
Year of Publication: 
2022
Series/Report no.: 
LawFin Working Paper No. 39
Publisher: 
Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin), Frankfurt a. M.
Abstract: 
We analyze how informed investors trade in the options market ahead of corporate news when they receive private, but noisy, information about the timing and impact of these announcements on stock prices. We propose a framework that ranks options trading strategies (option type, maturity, and strike price) based on their maximum attainable leverage when price-taking investors face market frictions. We exploit the heterogeneity in announcement characteristics across twelve categories of corporate events to support that event-specific information signals are informative for announcement returns and that they impact the optimal choice of option moneyness and tenor.
Subjects: 
corporate announcements
derivatives
event studies
insider trading
market microstructure
JEL: 
G12
G13
G14
K42
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.