The delta- and vega-related information content of near-the-money option market trading activity

This paper evaluates the information content of trading activity in near-the-money option markets. The results provide compelling evidence consistent with hypotheses of delta- and vega-informed trading activity in near-the-money option markets for firms with actively traded near-the-money options. However, considerably less evidence in support of the same hypotheses is found for firms with thinly traded near-the-money options. Hence, both the delta- and vega-related information content of near-the-money option trading activity appear to be positively related to overall near-the-money option trading activity. Lastly, near-the-money option trading activity is, in general, more vega-informative than delta-informative.