DOI
10.1016/j.irfa.2006.05.001
Abstract
Using a sample of cash tender offers occurring between 1993 and 2002, we find evidence that the options market has become the preferred venue for traders attempting to profit on anticipated announcements. Options offer advantages relative to stocks. Traders gain leverage by trading in options and multiple options contracts on an individual stock. The results of our study indicate that a substitution effect does exist. Abnormal volume in the option market replaces abnormal volume in the stock market prior to cash tender offer announcements, and this abnormal option volume precedes abnormal stock volume for targets with or without traded options.
Document Type
Article
Publication Date
2006
Publisher Statement
Copyright © 2006 Elsevier Inc. Article first published online: 2 JUNE 2006. DOI: 10.1016/j.irfa.2006.05.001
The definitive version is available at: http://ac.els-cdn.com/S1057521906000421/1-s2.0-S1057521906000421-main.pdf?_tid=85edadca-5880-11e4-b1ce-00000aacb35e&acdnat=1413827155_f36de37ccd86f1e37ea3c56c590957b2
Full citation:
Arnold, Tom, Gayle Erwin, Lance Nail, and Terry Nixon. "Do Option Markets Substitute for Stock Markets? Evidence from Trading on Anticipated Tender Offer Announcements." International Review of Financial Analysis 15, no. 3 (2006): 247-55. doi:10.1016/j.irfa.2006.05.001.
Recommended Citation
Arnold, Tom; Erwin, Gayle; Nail, Lance; and Nixon, Terry D., "Do Option Markets Substitute for Stock Markets?" (2006). Finance Faculty Publications. 11.
https://scholarship.richmond.edu/finance-faculty-publications/11