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RFS Advance Access originally published online on July 6, 2006
Review of Financial Studies 2007 20(3):813-857; doi:10.1093/rfs/hhl025
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© The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org.

Option Market Activity

Josef Lakonishok
University of Illinois at Urbana-Champaign and National Bureau of Economic Research

Inmoo Lee
Korea University and National University of Singapore

Neil D. Pearson
University of Illinois at Urbana-Champaign

Allen M. Poteshman
University of Illinois at Urbana-Champaign

Address correspondence to: Allen M. Poteshman, Department of Finance, College of Business, University of Illinois at Urbana-Champaign, 340 Wohlers Hall, 1206 South Sixth Street, Champaign, IL 61820, or e-mail: poteshma{at}uiuc.edu

This article uses a unique option data set to provide detailed descriptive statistics on the purchased and written open interest and open buy and sell volume of several classes of investors. We also show that volatility trading through straddles and strangles accounts for a small fraction of option trading volume and presents evidence that a large percentage of call writing is part of covered call positions. Finally, we find that during the stock market bubble of the late 1990s and early 2000 the least sophisticated investors in the data set substantially increased their purchases of calls on growth but not value stocks. (JEL: G0, G1, G12, G13, G14)


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