This study investigates the relation between informed options trading and stock price crash risk. Higher options to stock trading volume ratio ( O/S ), used as a proxy for informed options trading, is associated with lower future crash risk. This negative relation is more pronounced for firms with tighter short‐sale constraints, riskier firms, and firms with greater information asymmetry, and when the options market is more liquid. The finding is robust to tests exploring quasi‐natural experiments and instrumental variable analysis. Further results are consistent with firm‐specific information incorporation and managerial bad news hoarding serving as potential channels for the O/S –crash‐risk relationship.
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Qin et al. (2026) studied this question.
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