We study the cross-section of stock option returns by sorting stocks on the difference between historical realized volatility and at-the-money implied volatility. We find that a zero-cost trading strategy that is long (short) in the portfolio with a large positive (negative) difference between...

We use information from over two million trading strategies that are randomly generated using real data, and from strategies that survive the publication process to infer the statistical properties of the set of strategies that could have been studied by researchers. Using this set, we compute...

We study the cross-section of stock options returns and find an economically important source of mispricing in individual equity options. Sorting stocks based on the difference between historical realized volatility and market implied volatility, we find that a zero-cost trading strategy that is...

We show that much of the profitability in equity option return strategies, that try to capture option mis-pricing by taking exposure to underlying volatility, can be explained by an IPCA model. The alpha reduction, relative to competing static factor models, is between 50% and 75% depending on...