Download or read book Informed Traders, Long-Dated Options, and the Cross Section of Stock Returns written by Mark Clements and published by . This book was released on 2017 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Option prices predict the cross section of equity returns. We show that, unconditionally, the prices of long-dated options contain all the information relevant for predicting returns. Information, however, shifts towards short-dated options when an earnings announcement is imminent and when options are cheap to trade. The difference between short- and long-dated options also predicts the timing of merger announcements. Our results are consistent with option prices reflecting the actions of informed traders, and with these traders optimally choosing option maturities to maximize the value of their information.