Informed Options Trading prior to M & A Announcements : Insider Trading ? ∗

  title={Informed Options Trading prior to M & A Announcements : Insider Trading ? ∗},
  author={Patrick Augustin and Menachem Brenner and Marti G. Subrahmanyam},
We investigate informed trading activity in equity options prior to the announcement of corporate mergers and acquisitions (M&A). For the target companies, we document pervasive directional options activity, consistent with strategies that would yield abnormal returns to investors with private information. This is demonstrated by positive abnormal trading volumes, excess implied volatility and higher bid-ask spreads, prior to M&A announcements. These effects are stronger for out-of-the-money… CONTINUE READING


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