RT Journal Article
SR Electronic
T1 Information Leakage in Energy Derivatives around News Announcements
JF The Journal of Derivatives
FD Institutional Investor Journals
SP jod.2020.1.095
DO 10.3905/jod.2020.1.095
A1 Marc J. M. Bohmann
A1 Vinay Patel
YR 2020
UL https://pm-research.com/content/early/2020/02/06/jod.2020.1.095.abstract
AB We examine the behavior of US crude oil and natural gas futures options implied volatility based measures as proxies for information leakage around news announcements between 2007 and 2017. In the five days preceding news releases, we report abnormal changes in the levels of futures options implied volatility spreads and skew. In addition, we report a statistically significant relationship between abnormal announcement date returns and abnormal changes in pre-announcement implied volatility spreads/skew. Our findings indicate that at least some investors are informed about the details of future crude oil and natural gas news.TOPICS: Options, derivativesKey Findings• The study offers a unique examination of information leakage in crude oil and natural gas futures options prior to commodity specific news between 2007 to 2017.• We report abnormal changes in implied volatility spreads and skew in the five days prior to news announcements.• Pre-announcement abnormal options trading activity indicates that some traders have knowledge about the details of upcoming energy news.