Table 3.
Common Trades of Insiders and Option Market Participants: Evidence from ISE Signed Volume. This table presents the results of a conditional bivariate sorting on the volatility spread (VS) and net insider demand (NBR). Each month, we first sort firms into terciles based on VS. We label these OPTION NEG (bottom VS tercile), OPTION NTRL (middle VS tercile), and OPTION POS (top VS tercile). We then bin firms within each tercile based on their insider trading activity: INSIDER SELL (NBR less than zero), INSIDER NTRL (NBR equal to zero), or INSIDER BUY (NBR greater than zero). We report the average of either signed call volume ratio, signed put volume ratio, or the difference of the signed call and signed put ratio within each cell. The HEDGE portfolio takes a long position in the stocks with positive net insider demand and a short position in the stocks with negative net insider demand within each option market sentiment group. For reference, the UNCONDITIONAL row includes the results of univariate sorting on NBR. Panel A reports results using all insider trades. Panel B reports results using the insider trade filter from Cohen et al. (2012). We report t-statistics in parentheses. The sample period is from January 1996 to December 2017. *, ⁎⁎, and ⁎⁎⁎ denote significance at the 10%, 5%, and 1% levels, respectively.
| Signed Call Ratio |
Signed Put Ratio |
Signed Call Minus Put Ratio |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| INSIDER SELL | INSIDER NTRL | INSIDER BUY | HEDGE | INSIDER SELL | INSIDER NTRL | INSIDER BUY | HEDGE | INSIDER SELL | INSIDER NTRL | INSIDER BUY | HEDGE | |
| Panel A: Full Sample | ||||||||||||
| UNCONDITIONAL | 0.13 | 1.49*** | 2.27*** | 2.14*** | 2.65*** | 2.06*** | 1.37** | –1.28** | –2.76*** | -0.79** | 0.98 | 3.75*** |
| (0.57) | (5.69) | (4.91) | (4.92) | (9.53) | (6.42) | (2.42) | (-2.32) | (–9.02) | (-2.50) | (1.40) | (5.36) | |
| OPTION NEG | –0.74** | –0.08 | –1.41 | –0.68 | 4.11*** | 3.38*** | 3.86*** | –0.23 | -5.36*** | –3.75*** | -4.00*** | 1.26 |
| (–2.05) | (–0.26) | (–1.45) | (–0.70) | (9.58) | (8.40) | (3.62) | (-0.19) | (–10.47) | (–8.11) | (–3.01) | (0.85) | |
| OPTION NTRL | –0.22 | 0.81*** | 1.14* | 1.36** | 3.12*** | 3.03*** | 0.86 | -2.26*** | –3.43*** | –2.39*** | 0.49 | 3.93*** |
| (–0.82) | (2.90) | (1.72) | (2.07) | (10.39) | (7.87) | (1.28) | (–3.52) | (–9.41) | (–5.30) | (0.55) | (4.52) | |
| OPTION POS | 1.67*** | 3.87*** | 6.57*** | 4.90*** | 0.75* | –0.24 | –1.29 | -2.04** | 0.68 | 3.60*** | 7.24*** | 6.56*** |
| (5.56) | (11.48) | (7.65) | (5.53) | (1.92) | (–0.52) | (-1.27) | (-2.03) | (1.49) | (6.98) | (5.06) | (4.60) | |
| Panel B: Non-Routine Insider Trades | ||||||||||||
| UNCONDITIONAL | –0.04 | 1.24*** | 3.51*** | 3.54*** | 2.64*** | 1.93*** | 0.27 | -2.37* | -2.90*** | -0.94*** | 3.25** | 6.14*** |
| (–0.11) | (5.67) | (3.20) | (3.13) | (8.04) | (6.66) | (0.20) | (-1.76) | (–7.37) | (-3.39) | (1.98) | (3.65) | |
| OPTION NEG | –1.16* | –0.14 | –0.20 | 0.41 | 4.88*** | 3.42*** | 1.62 | -3.26 | -6.64*** | -3.84*** | -1.19 | 5.07* |
| (–1.77) | (–0.50) | (–0.12) | (0.23) | (7.58) | (9.99) | (0.66) | (–1.25) | (–7.09) | (–10.66) | (–0.42) | (1.68) | |
| OPTION NTRL | –0.27 | 0.79*** | 3.75** | 3.96** | 2.80*** | 2.42*** | 3.58 | 0.67 | –3.19*** | –1.72*** | 0.65 | 3.97* |
| (–0.69) | (3.28) | (2.04) | (2.12) | (6.77) | (7.99) | (1.56) | (0.30) | (-6.37) | (-5.28) | (0.27) | (1.66) | |
| OPTION POS | 1.06** | 3.48*** | 9.32*** | 8.36*** | 0.62 | –0.29 | –1.27 | -1.65 | 0.12 | 3.32*** | 8.51*** | 8.38*** |
| (2.00) | (11.83) | (3.88) | (3.35) | (1.11) | (–0.71) | (–0.50) | (-0.65) | (0.18) | (7.61) | (2.79) | (2.63) | |
| Panel C: Opening Options Trades Only | ||||||||||||
| UNCONDITIONAL | 0.87 | 1.53** | 3.70*** | 2.83*** | 1.39** | –2.09*** | –3.35*** | –4.74*** | –0.55 | 3.42*** | 6.80*** | 7.35*** |
| (1.33) | (2.50) | (5.27) | (5.16) | (2.52) | (–3.56) | (-4.18) | (–7.51) | (-0.87) | (5.71) | (7.89) | (9.49) | |
| OPTION NEG | 0.72 | 0.78 | –0.06 | –0.79 | 0.85 | –2.84*** | –0.05 | –0.90 | –0.39 | 3.12*** | 0.21 | 0.41 |
| (0.97) | (1.16) | (–0.05) | (–0.68) | (1.22) | (–4.33) | (–0.04) | (–0.68) | (–0.48) | (4.19) | (0.15) | (0.26) | |
| OPTION NTRL | 0.14 | –0.20 | 1.62* | 1.48* | 2.71*** | 0.95 | –2.83*** | -5.54*** | -2.43*** | –0.83 | 4.68*** | 7.11*** |
| (0.21) | (–0.27) | (1.71) | (1.76) | (4.88) | (1.49) | (–2.67) | (–6.45) | (–3.59) | (–1.25) | (3.91) | (6.21) | |
| OPTION POS | 2.57*** | 4.22*** | 9.21*** | 6.64*** | –0.34 | –5.54*** | –7.41*** | -7.07*** | 2.77*** | 9.21*** | 15.39*** | 12.62*** |
| (3.67) | (6.80) | (8.73) | (5.82) | (–0.52) | (–8.60) | (–5.26) | (-5.13) | (3.74) | (12.83) | (8.89) | (7.11) | |