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Options and earnings announcements: an empirical study of volatility, trading volume, open interest and liquidity
Author(s) -
Donders Monique, W.M.,
Kouwenberg Roy,
Vorst Ton, C. F.
Publication year - 2000
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00118
Subject(s) - volatility (finance) , earnings , market liquidity , volatility smile , implied volatility , economics , stock (firearms) , monetary economics , financial economics , business , finance , mechanical engineering , engineering
In this paper we study the impact of earnings announcements on implied volatility, trading volume, open interest and spreads in the stock options market. We find that implied volatility increases before announcement days and drops afterwards. Also option trading volume is higher around announcement days. During the days before the announcement open interest tends to increase, while it returns to regular levels afterwards. Changes in the quoted spread largely respond to higher trading volume and changes in implied volatility. The effective spread increases on the event day and on the first two days following the earnings announcement.