We analyze the effect of option trading on the return predictability of short interest. There is no difference in the return predictability of short-interest ratios between stocks with and without traded options. The predictability of the put-call open interest ratio (PCOIR) is weaker than that...

If the implied volatility is higher than the realized volatility, OTM call returns can be negative and decrease in strike prices/skewness, a return pattern also consistent with skewness preference. Empirically, we find the above return pattern is not driven by investors purchasing OTM calls, but...

We propose a new measure of financial intermediary constraints based on how the intermediaries manage their tail risk exposures. Using a unique dataset for the trading activities in the market of deep out-of-the-money S&P 500 put options, we identify periods when the variations in the net amount...

We propose a new measure of financial intermediary constraints based on how the intermediaries manage their tail risk exposures. Using data for the trading activities in the market of deep out-of-the-money S&P 500 put options, we identify periods when the variations in the net amount of trading...

We provide a comprehensive comparison of equity short-selling activity and option market activity in predicting future returns. Three variables are constructed, namely the equity short interest ratio (SIR), put-call open interest ratio (PCOIR), and put-call buy volume ratio (PCBVR). The...

We find that the demand for stock option positions that increase exposure to the underlying is positively related to measures of investor sentiment and past market returns, while the demand for index options is invariant to these factors. These differences in trading patterns are reflected in...

A crowded trade emerges when speculators' positions are large relative to the asset's liquidity, making exit difficult. We study this problem of recent regulatory concern by focusing on short-selling. We show that days to cover (DTC), the ratio of short interest to trading volume, measures the...