I work for a Fortune 500 company. I monitor activity in our stock very closely. I look at daily trading volume, stock price variability, short interest, etc.
Since we’re a large company, our stock is quite liquid so we feel that the stock market gives us ample information about how the markets view our stock.
I want to know if there is any additional information that the options market for our stock can provide. One thing that we can currently use the options market for is “implied volatility”. By looking at the prices on our options, we can see how risky options investors believe that our stock is.
Is there anything else that we can use the options market for? Even information that solidifies what we learn from the stock market, possibly?
Options traders don’t have any more information than regular traders, so there really is a limit as to what you can read from options trading. You should see options prices rise and fall with the stock price. The further out the option, the less volatility. If you see a dramatic swing in price for options that are dated well into the future, it would be a signal that the market thinks something fundamental has changed with regards to your company.
In general, does the population of options traders for a given stock contain a disproportionate number of employees of that particular company? If so, you might be able to argue that, as a group, options traders for a particular stock tend to be more educated about the goings-on of that company then the general public, without actually being “insiders”.
If you could identify a population of people which consists entirely of employees of a company, you’d probably right to be concerned if that population loses confidence in the stock. The question is whether or not “options traders of my company’s stock” is significantly closer in makeup to this hypothetical population than just a random sampling of stock traders who own your stock.
You can look at put-call parity and the risk-free rate to determine the price of this “new” synthetic asset. It should exactly equal your stock’s price. But the only real extra information you can determine from options trading is the change in general consensus of implied volatility by looking at daily volume as it relates to news/announcements that are closely tied with your firm.