Cross‐Market Convergence Trading in Options Order Flow

We suggest a framework to isolate and quantify convergence‐driven options order imbalances using synthetic positions from matched calls and puts. Unlike the conventional measure of informed trading, our convergence trading measure increases with options–futures mispricing. Convergence‐driven imbalances negatively predict related‐market returns, unlike informed trading imbalances. Foreign (domestic) investors primarily respond to options–futures (options–spot) mispricing. Investors react more strongly to spot undervaluation than overvaluation, consistent with short‐sale constraints. This asymmetry is not observed in options–futures convergence. Our findings identify convergence trading as a distinct order‐flow channel through which cross‐market price deviations are corrected.