E. Ofek, M. Richardson, and R.F. Whitelaw, “Limited Arbitrage and Short Sales Restrictions: Evidence from the Options Markets,” Journal of Financial Economics, 29 May 2003.
Abstract: We investigate empirically the well-known put–call parity no-arbitrage relation in the presence of short sales restrictions. Violations of put–call parity are asymmetric in the direction of short sales constraints, and their magnitudes are strongly related to the cost and difficulty of short selling. These violations are also related to both the maturity of the option and the level of … Read More »
J. Pan and A.M. Poteshman, “The Information in Option Volume for Stock Prices,” (Seminar paper, MIT Sloan School of Business and University of Illinois at Urbana-Champaign, 13 January 2003.
Abstract: We find strong evidence that option trading volume contains information about future stock price movements. Taking advantage of a unique dataset from the ChicagoBoard Options Exchange, we construct put to call ratios for underlying stocks, using volume initiated by buyers to open new option positions. Performing daily cross-sectional analyses from 1990 to 2001, we find that buying stocks with … Read More »