earticle

영어

This paper examines the U.S. stock and options markets from January 1996 to December 2010 to investigate whether and how informed investors establish their option positions during the one week prior to an SEO issuance date. To do this, we employ two measures: the stock price ratio (SPR) and the normalized option trading volume (NOTV). SPR is the log price ratio of the actual stock price to the implied stock price from option prices during the six days before an issuance date including the issuance date. NOTV is defined as the ratio of option trading volumes for the six days before an issuance date including the issuance date to option trading volumes during the five days from ten days before the issuance date to six days before. High SPRs, which proxy the extent of synthetic short sale positions, are significantly associated with a permanent price discount, which indicates informed option trades prior to an issuance date. Even though option trading volumes are less informative than SPRs, they seem to increase significantly because of the increase in synthetic short sales due to the strengthening of Rule 105 after October 2007. In addition, more informed option trades occur in shelf registered SEOs than in nonshelf registered SEOs.