Options and earnings announcements: an empirical study of volatility, trading volume, open interest and liquidity |
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| Authors: | Monique WM Donders Roy Kouwenberg & Ton C F Vorst |
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| Institution: | MeesPierson Derivatives, The Netherlands,;Econometric Institute, Erasmus University Rotterdam, Netherlands,;Department of Finance and Erasmus Center for Financial Research, Erasmus University Rotterdam, The Netherlands |
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| Abstract: | 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. |
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| Keywords: | earnings announcements volatility volume spreads open interest |
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