Is there information leakage prior to share repurchase announcements? Evidence from daily options trading

This study is the first examination of daily stock options trading prior to corporate share repurchase announcements. Using a sample of over 2,000 share repurchase announcements in the United States during the 1996-2012 period, I find that the average volatility spreads become abnormally high immediately prior to repurchase announcements. Furthermore, the pre-announcement abnormal volatility spreads are positively associated with the repurchase announcement return. The results are robust to different regression specifications and randomization tests. Taken together, my findings suggest that some options market participants are informed about the upcoming repurchase announcements, facilitated by information leakage.