Earnings announcement saliency and option trading
The purpose of this study is to investigate option trading before earnings announcement dates as a function of report saliency. We define report saliency as the number of firms announcing earnings on the same day as an examined firm. We find that overall option trading volume is higher, option trading volume increases substantially near earnings announcement dates, and that investors trade more puts than calls when earnings announcements have higher visibility. Additional analyses indicate that these patterns are more pronounced for smaller firms and relate to investors buying and holding downside risk protection before salient earnings announcements.
Adams, Tom and Neururer, Thaddeus, "Earnings announcement saliency and option trading" (2021). Department of Accounting Faculty Work. 25.