Journal of Financial and Quantitative Analysis

Research Article

Stealth Trading in Options Markets

Amber Ananda1 and Sugato Chakravartya2

a1 [email protected], University of Central Florida, College of Business, Orlando, FL 32816

a2 [email protected], Purdue University, West Lafayette, IN 47906


We investigate how price discovery occurs in the options markets through traders' trade size choice. By employing transactions data on all options traded on a sample of 100 firms, we show that informed traders fragment their orders into small (medium) trades for low (high) volume contracts. We also find that almost 60% of the price discovery occurs in the exchange with the largest market share for a given option, where informed traders favor medium size trades. Upon examining distinct option series for a given stock, we find that at-the-money calls display the highest information share.