strong positive (negative) relation between call (put) holdings

http://www.finance.unimelb.edu.au/research/DDU09/Papers/Aragon_hf2009v0120_Final.pdf

positive (negative) relation between call (put) holdings and subsequent abnormal stock returns.

These relations persist even after the holdings disclosures become publicly available. A real-time

feasible tracking portfolio of stocks based upon publicly observable hedge fund option holdings

earns annualized abnormal returns of 14.8%. Compared to non-users, hedge fund option users

manage larger portfolios and portfolios with two post-fee performance features favorable for their

constituent hedge fund investors: lower return volatility and higher Sharpe ratio. Overall, the

results highlight a previously undocumented speculative role of derivatives among professional

investors.