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AbstractThe purpose of this study is to investigate option trading before earnings announcement dates as a function of report saliency. We define report saliency as the number of firms announcing earnings on the same day as an examined firm. We find that overall option trading volume is higher, option trading volume increases substantially near earnings announcement dates, and that investors trade more puts than calls when earnings announcements have higher visibility. Additional analyses indicate that these patterns are more pronounced for smaller firms and relate to investors buying and holding downside risk protection before salient earnings announcements.

Title page -- Copyright page -- 1 Option Market Basics -- Exchange-Traded Options -- Options Basics -- The Components of an Options Contract -- Reading Option Quotes -- Building Blocks -- Margins -- 2 Option Pricing -- Pricing an Option -- Option Pricing Background -- Factors Influencing Option Pricing -- Summary -- 3 Option Sensitivities -- Sensitivity Analysis -- Delta -- Gamma -- Theta -- Vega -- Quick Revision -- The Greeks and Trading -- Finding the Greeks -- 4 Call Buying -- How to Select a Call -- Selection Criteria Summary -- Call Buying and Cash Instruments -- 5 Call Writing