The lead-lag relationship between the options and stock markets prior to earnings announcements and the effect of securities regulation

There is substantial anecdotal and academic evidence that informed trading occurs prior to informationally important events to exploit the subsequent change in stock price. However, almost all of the previous research examines only stock market activity. Despite the lack of research on the presence of informed trading in the options market prior to informational events, there are many reasons why informed traders would prefer the options market to the stock market. If informed traders prefer the options market to the stock market, we should observe price changes in the options market leading price changes in the stock market.