Option trading: Information or differences of opinion?

► The driver of option trading is differences of opinion, not information. ► Option trading around earnings announcements is dominated by speculative, retail investors. ► Option traders take cues from the stock market before earnings announcements and speculate accordingly. ► Both cross-section and time-series regressions reveal that option trading is driven by differences of opinion. ► Informed trading is present in stocks, but not in options.