The price impact of options and futures volume in after-hours stock market trading

We set out in this study to investigate the price impacts of options and futures trading prior to the stock market opening. Our findings indicate clustering by a high proportion of informed traders during the ‘pre-open’ period, with their options and futures trading volume being found to have significant influences on price changes. The evidence from our focus on this specific trading period suggests that in both the options and futures markets, institutional investors are more sophisticated than other traders. The trading behavior of these informed traders adds support to the ‘stealth-trading’ hypothesis, particularly in the futures market.

► We investigate the price impacts of options and futures trading prior to the stock market opening.
► ‘Pre-open’ volumes strongly affect price changes, suggesting informed traders clustering.
► In both markets, institutional investors are more sophisticated than other traders.
► The trading behavior of these informed traders adds support to the ‘stealth-trading’ hypothesis.