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Journal article
Returns to Option Strategies Following Class Action Lawsuits
The Journal of investing, Vol.29(1), pp.119-131
12/01/2019
Web of Science ID: WOS:000640353600009
Abstract
Turmoil and uncertainty confront firms when they are named as defendants in class action lawsuits. In this article, we consider whether option markets interpret the implications of these dramatic corporate events for mid- to long-term performance. In particular, we consider relatively simple, long, volatility-based combined option positions. We find consistent, positive, and frequently significant returns to option straddle and strangle positions held from 6 months to 1.5 years after a firm is targeted in a class action. This may be indicative of underappreciation, in the option markets, for the dichotomous nature of firm stock price performance as the class action proceeds toward a resolution.
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Details
- Title
- Returns to Option Strategies Following Class Action Lawsuits
- Publication Details
- The Journal of investing, Vol.29(1), pp.119-131
- Resource Type
- Journal article
- Publisher
- Pageant Media Ltd
- Copyright
- © 2019 Pageant Media Ltd
- Identifiers
- WOS:000640353600009; 99380171974106600
- Academic Unit
- Accounting and Finance; Lewis Bear Jr. College of Business
- Language
- English