Price discrimination against retail Investors: Evidence from mini options

Yubin Li, Chen Zhao, Zhaodong Zhong

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

This paper studies the rise and fall of “Mini” options that are especially catered to retail investors for popular but high-priced securities. Using transaction-level data, we find that transaction costs of Mini options are much higher than those of standard options and the difference cannot be fully explained by cost-related determinants. Furthermore, we find evidence of price discrimination against retail investors from analyses of price elasticities of option traders, an event-study of changes in bid-ask spreads around earnings announcements, and comparisons of trade prices paid by Mini and standard option traders for the same security at approximately the same time.

Original languageEnglish (US)
Pages (from-to)50-64
Number of pages15
JournalJournal of Banking and Finance
Volume106
DOIs
StatePublished - Sep 2019

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Earnings announcements
  • Liquidity
  • Options
  • Price discrimination
  • Retail investors

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