Abstract
Jin, Livnat, and Zhang (JLZ) examine the predictive ability of two option characteristics – volatility skew and volatility spread – around significant information events such as earnings announcements and unscheduled corporate announcements. They conclude that option traders have an information advantage over equity traders prior to a variety of information events, as well as after unscheduled events. I discuss some of the major themes that arose during JLZ’s conference presentation, including the distinction between information processing and information acquisition; the volatility measures used by JLZ; and JLZ’s interpretation of their results.
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