Conventional estimates of costs of taking liquidity in options markets are large. Nonetheless, options trading volume is high. We resolve this puzzle by showing that options price changes are predictable at high frequency and many traders time executions by buying (selling) when the option fair...

The option implied volatility spread and skew predict stock returns. These variables also reflect the expected cost of borrowing stock to sell short. The stock borrowing fee implied from options prices predicts changes in quoted borrowing fees and stock returns; however, the volatility spread...

The question of whether and to what extent option trading impacts underlying stock prices has been of interest since options began exchange-based trading in 1973. Recent research presents evidence of an informational channel through which option trading impacts stock prices by showing that...

I show that the inventory risk faced by market-makers has a first-order effect on option prices. I introduce a simple approach that decomposes the price impact of trades into inventory risk and asymmetric information components. While both components are large for option trades, the inventory...