Gauging Who Is More Up to Speed
The research literature suggests that both short selling and options-trading activity serve to predict future market returns. Short sellers may be industry insiders or other informed market participants who are positioning themselves based on information that has not yet been discounted by the market. The addition of listed options for an asset has generally been found to provide additional, non-redundant information about future returns over and above the information contained in the equity order flow. A recent study evaluates which type of trading activity -- short selling or options trading -- is more predictive than whether the two are complementary.
In the study, "Who are more informed, short sellers or option traders?" R. Jared DeLisle, Bong Soo Lee, and Nathan Mauck attempt to confirm whether information from options markets actually is non-redundant and to determine which group of traders is more informed. One of the challenges for any comparison of short sellers and options traders is that there is likely significant overlap between the participants in those two groups....453 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
Already a Subscriber? Please login.