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Accounting For Earnings Announcements In The Pricing Of Equity Options
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Book Synopsis Accounting for Earnings Announcements in the Pricing of Equity Options by : Tim Leung
Download or read book Accounting for Earnings Announcements in the Pricing of Equity Options written by Tim Leung and published by . This book was released on 2015 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study an option pricing framework that accounts for the price impact of an earnings announcement (EA), and analyze the behavior of the implied volatility surface prior to the event. On each known announcement date, we introduce a random jump to the stock price. Applying this idea to extend the Black-Scholes model, we obtain formulas for the pre-EA European option price, its implied volatility and various Greeks. We further incorporate random-time jumps in the stock price by extending the Kou jump-diffusion model to incorporate an EA jump, and provide an analytic option pricing formula. Moreover, we derive analytic bounds and asymptotics for the pre-EA implied volatility under various models. The calibration results demonstrate adequate fit of the entire IV surface prior to an announcement. We also compare the risk-neutral distribution of the EA jump to its historical distribution. Finally, we discuss the valuation and exercise strategy of pre-EA American options, and illustrate an analytical approximation and numerical results.
Book Synopsis Option Strategies for Earnings Announcements by : Ping Zhou
Download or read book Option Strategies for Earnings Announcements written by Ping Zhou and published by Financial Times/Prentice Hall. This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: By trading on corporate earnings, investors can reliably profit in both up and down markets, while avoiding market risk for nearly the entire quarter. In this book, two leading traders and portfolio managers present specific, actionable techniques anyone can use to capture these sizable profits. Ping Zhou and John Shon have performed an unprecedented empirical analysis of thousands of stocks, reviewing tens of millions of data points associated with option prices, earnings announcement returns, and fundamentals. Their massive analysis has identified consistent opportunities associated with focusing on the magnitude of the market's reaction to earnings, not its direction. Option Trading Set-Ups for Corporate Earnings News offers concrete guidance for improving the likelihood of making correct forecasts, and managing the risks of incorrect forecasts. It introduces several ways to exploit option trading opportunities around earnings news, discuss crucial issues that most retail investors haven't considered, and explore aspects of earnings-related option trading that have never been empirically examined and documented before. For example, they identify hidden patterns and potential opportunities based on valuation, industry, volatility, analyst forecasts, seasonality, and trades that immediately follow earnings announcements. Simply put, trading on earnings reports offers immense profit opportunities, if you know how. This book provides incontrovertible facts and detailed strategies, not just theories and anecdotes!
Book Synopsis Trading on Corporate Earnings News by : John Shon
Download or read book Trading on Corporate Earnings News written by John Shon and published by FT Press. This book was released on 2011-03-09 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Book Synopsis Earnings Announcements and Option Prices by : Michael S. Johannes
Download or read book Earnings Announcements and Option Prices written by Michael S. Johannes and published by . This book was released on 2011 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we analyze the statistical and economic impact of earnings announcements on individual equity option prices. We develop no-arbitrage option pricing models in the presence of earnings announcements; we nonparametrically test for the importance of earnings announcements on option prices; we develop estimators of the primary parameter capturing the uncertainty present in earnings announcements, the earnings jump volatility; and we investigate the pricing implications of earnings announcements. We find strong evidence that uncertainty surrounding earnings plays a central role in determining option prices.
Book Synopsis Options and Accounting Information by : C. Jose Garcia
Download or read book Options and Accounting Information written by C. Jose Garcia and published by . This book was released on 2014 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the informational role of options trading in the price discovery process around the dissemination of accounting information, specifically annual and quarterly earnings announcements. Firstly, we examine the effect of options markets by analyzing stock market reaction to earnings news conditional on the availability of options markets. Secondly, we examine options-trading activity around the release of earnings news. Results show that when options trading is available, the options market enhances the price efficiency of equity markets. Moreover, the dissemination of earnings news is associated with significant unusual activity in the options market due to informed trading, especially when the earnings surprise is highly good.
Book Synopsis option trading and earnings news dissemination by : kaushik i. amin and charles m.c. lee
Download or read book option trading and earnings news dissemination written by kaushik i. amin and charles m.c. lee and published by . This book was released on 1993 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Why Investors Should Trade Options Around Earnings Announcements by : John Shon
Download or read book Why Investors Should Trade Options Around Earnings Announcements written by John Shon and published by Pearson Education. This book was released on 2011-03-16 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Element is an excerpt from Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions (9780137084920) by John Shon, Ph.D., and Ping Zhou, Ph.D. Available in print and digital formats. Two Line Description How to trade options before earning announcements — and profit whether the market raves or rages! Text Excerpt We’ve all seen perplexing market reactions to earnings announcements, but would you have guessed that this happens 40% of the time? Even if you predict the right direction of an earnings surprise, it’s still easy to lose money with a directional bet. So how can you profit from an earnings announcement? You use an options trading strategy called a “straddle.”
Book Synopsis Why Are Earnings Announcements So Important to Traders and Investors? by : John Shon
Download or read book Why Are Earnings Announcements So Important to Traders and Investors? written by John Shon and published by Pearson Education. This book was released on 2011-03-16 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Element is an excerpt from Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions (9780137084920) by John Shon, Ph.D., and Ping Zhou, Ph.D. Available in print and digital formats. Understand those crucial quarterly earning announcements: how they work, and how they impact stock prices. Quarterly earnings announcement are the most salient, most anticipated, regularly-recurring announcement that companies make. They are the most watched piece of information that comes directly from the people that know the business the best. They are also considered the most reliable source of information, largely because companies are subject to strict SEC Rule 10b-5 rules...
Author :United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Publisher : ISBN 13 : Total Pages :234 pages Book Rating :4.0/5 (13 download)
Book Synopsis The FASB Stock Options Proposal by : United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises
Download or read book The FASB Stock Options Proposal written by United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises and published by . This book was released on 2004 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Options Pricing Theoretical Relation between Earnings and Stock Market Returns by : Zane L. Swanson
Download or read book An Options Pricing Theoretical Relation between Earnings and Stock Market Returns written by Zane L. Swanson and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper demonstrates a theoretical linkage between stock returns and accounting earnings based on option pricing theory. The advantage of this approach is a closed-form solution for the earnings response coefficient (ERC) that is a consequence of a partial equilibrium of investors' indifference between owning a firm's assets or its stock. The resultant ERC is defined in terms of four factors: earnings volatility, the length of the investment horizon, a leverage measure and the risk-free rate. The first order conditions indicate that: increases in debt reduce ERCs; increases in the risk-free rate increase ERCs; and the ERC is a convex function of both earnings volatility and the investment horizon.
Book Synopsis Earnings Surprise and Ex-ante Price Effects in Options Markets by : Jin-kyu Joo
Download or read book Earnings Surprise and Ex-ante Price Effects in Options Markets written by Jin-kyu Joo and published by . This book was released on 1988 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Option Strategies for Earnings Announcements by : Ping Zhou
Download or read book Option Strategies for Earnings Announcements written by Ping Zhou and published by FT Press. This book was released on 2012-10-15 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: By trading on corporate earnings, investors can reliably profit in both up and down markets, while avoiding market risk for nearly the entire quarter. In this book, two leading traders and portfolio managers present specific, actionable techniques anyone can use to capture these sizable profits. Ping Zhou and John Shon have performed an unprecedented empirical analysis of thousands of stocks, reviewing tens of millions of data points associated with option prices, earnings announcement returns, and fundamentals. Their massive analysis has identified consistent opportunities associated with focusing on the magnitude of the market’s reaction to earnings, not its direction. Option Trading Set-Ups for Corporate Earnings News offers concrete guidance for improving the likelihood of making correct forecasts, and managing the risks of incorrect forecasts. It introduces several ways to exploit option trading opportunities around earnings news, discuss crucial issues that most retail investors haven’t considered, and explore aspects of earnings-related option trading that have never been empirically examined and documented before. For example, they identify hidden patterns and potential opportunities based on valuation, industry, volatility, analyst forecasts, seasonality, and trades that immediately follow earnings announcements. Simply put, trading on earnings reports offers immense profit opportunities, if you know how. This book provides incontrovertible facts and detailed strategies, not just theories and anecdotes!
Book Synopsis Accounting for Stock-based Compensation by : Financial Accounting Standards Board
Download or read book Accounting for Stock-based Compensation written by Financial Accounting Standards Board and published by . This book was released on 1993 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Information Content of Earnings Announcements by : John Andrew Campbell
Download or read book The Information Content of Earnings Announcements written by John Andrew Campbell and published by . This book was released on 1989 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities Publisher : ISBN 13 : Total Pages :204 pages Book Rating :4.F/5 ( download)
Book Synopsis Employee Stock Options by : United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities
Download or read book Employee Stock Options written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities and published by . This book was released on 1994 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Accounting for Stock Options by : Nicole Marciano
Download or read book Accounting for Stock Options written by Nicole Marciano and published by . This book was released on 2004 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt: The task of accounting for equity compensation has never been more controversial and complex than it is today. There exists a viewpoint that one reason for current business scandals was the use of equity compensation arrangements. These arrangements gave companies the ability to issue executive stock options with no financial statement impact. In response to these issues, corporate practices are changing. Stock options are an important component of a company's executive compensation program. Stock options are a significant cost for corporations and an even larger benefit to executives. That is partly the reason why corporations fight to avoid making a charge for stock options against earnings. When a corporation gives something of value to its employees, in return for their services, it is clearly a compensation expense. Employee stock options are a legitimate expense and are considered the cost of doing business in today's economy. Using traditional accounting methodology, expenses are reported on the entity's income statement. Failure to account for stock options is a disservice to investors and a weakness of America's capital markets. Without consistent valuation rules, it is nearly impossible to compare one company's performance with another. This thesis will discuss the current reasons, methods, and effects of standardized expensing of stock options. This thesis (1) proves the role of the Financial Accounting Standards Board in passing accounting standards is being undermined by current investigations of the Securities and Exchange Commission through analysis of The Securities Exchange Acts of 1933 and 1934 and The Sarbanes-Oxley Act of 2002. (2) proves the necessity of accounting for stock options by examining Intel Corporation's financial statements and note disclosures regarding stock option expensing; (3) describes some of the valuation techniques used to value stock options and explains why these techniques are controversial; (4) predicts the impact of standardized expensing of stock options upon the economy, stockholders, and employees ; and (5) explores in detail the rationale and results of expensing stock options through presentation of comprehensive interpretation of Accounting Principles Board Opinions, Financial Accounting Standards Board Statements, and International Accounting Standards Board Exposure Draft. It is important that the public users of financial statements know the true significance of company performance indicators like earnings per share and net income. In addition, investors need to be aware of the reasons for and against an entity's expensing of stock options on the income statement in order to make informed business decisions. Most of the coverage on this topic via the media, periodicals, newspapers, books, and financial statements themselves are too technical to be used as an adequate source. The importance of this study is to organize, supplement and explain accounting for stock options in a logical manner. Hopefully, as a result, the stockholder, employee, and the business executive will be able to use this study as a source to determine the actual accounting and valuation techniques used, and their implications and ramifications.
Book Synopsis Stock Options and the New Rules of Corporate Accountability by : Donald P. Delves
Download or read book Stock Options and the New Rules of Corporate Accountability written by Donald P. Delves and published by McGraw Hill Professional. This book was released on 2003-09-22 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: "As a former CEO and independent director of several corporations, I find Don Delves' discussion of executive compensation -- including detailed and insightful reviews of the issues involving stock options -- to be exceedingly instructive. This is a book that members of compensation committees, indeed all corporate board members should read." -B. Kenneth West, Former CEO, Harris Trust and Savings Bank and member of several corporate boards. Guidelines for curbing today's stock option abuses, and making "payment for performance" the new imperative Stock options account for up to 90 percent of the average CEO's compensation--despite a falling stock market and often plunging corporate earnings. Stock Options and the New Rules of Corporate Accountability examines this hot-button issue, proposing new methodologies and techniques for better aligning stock options, executive compensation, performance rewards, and accounting, and making sense of what has become today's most controversial form of compensation. Executive compensation authority Don Delves explains how high-profile corporations like GE and Coca-Cola have opted to expense stock options and have adjusted their policies to prevent options from becoming disincentive tools, and he shows others how to follow suit. In addition, Delves gives decision makers the knowledge they need to: Increase accountability by treating stock options as expenses Balance options with other incentives Create healthier contracts between employers and employees
