Insider Trading with Options: Vacca (2026)

What this is. The paper’s core results, the datasets, and the identification strategy: enough to assess the scope of informed employee option trading and its channels, without reading all 21 pages. To replicate or extend, read the full source at the original.

TL;DR

Using daily securities registry data from Euroclear Finland (January 1995 to December 2014), Vacca (2026) documents that open-market purchases of own-company call options by employees predict positive subsequent stock returns on short horizons. The average market-adjusted weekly (five-day) return after an employee buys own-company options is 64 basis points, compared with approximately zero for purchases of options written on unrelated firms. Rank-and-file employees (below the level of manager or primary insider) account for the vast majority of own-company option purchases and their returns are numerically highest, although the return differences across employee ranks are not statistically significant. Rank-and-file trades exceed unrelated-firm purchases by 81 basis points. Consistent with the argument of Black (1975) that informed investors prefer options for their embedded leverage, employees trade own-company options at five to eight times the rate they trade own-company stocks. The predictability peaks before earnings announcements (approximately 150 basis points in the preceding week), remains elevated immediately after announcements, extends to Nokia supply-chain partner stocks, and is absent for former employees’ former-employer trades. The paper also uncovers a tipping channel: anonymous retail accounts that co-trade with employees earn positive returns; the difference between correlated-trade and tippee-only averages is not statistically significant (p=0.17).

Core results

All returns are market-adjusted weekly (five-day) returns, reported multiplied by 100 so that 0.64 = 64 basis points. Standard errors are clustered at the stock-trade date level. Locators point to the source PDF.

#	Result	Locator	Magnitude
R1	Own-company call option purchases by employees predict positive weekly stock returns; purchases of options on unrelated firms do not	Table 2, Panel A, p. 7	Own-company avg = 0.64% (N=4,091); unrelated firm avg = 0.04% (N=3,250); difference = 0.59***, p=0.000
R2	Rank-and-file employees account for most own-company buys and have high returns; their apparent advantage over higher ranks is not statistically significant	Table 2, Panel B, p. 7; Fig. 2, p. 7; §5.1, p. 16	Rank-and-file own-company avg = 0.71% (N=3,413); unrelated = -0.10% (N=2,587); difference = 0.81***, p=0.000; rank-level differences are not significant
R3	Own-company option purchases peak in informativeness before earnings announcements; the return difference remains positive immediately afterward	Fig. 4, p. 9; text pp. 8-9	~150 bps (annualized over 120%) for buys in window [-5,-1] before announcement; the difference remains over 80 bps in the days after announcements and fades farther from the event; 281 of 332 pre-announcement trades are by rank-and-file employees
R4	Former employees’ option purchases do not predict positive returns (falsification of the information-advantage story)	Table 3, Panel A, p. 13	Former employees avg = -0.11% (N=2,275); current employees avg = 0.64% (N=4,091); difference = 0.76***, p=0.000
R5	Employees at Nokia customer and supplier firms earn informed returns by trading Nokia options (supply-chain channel)	Table 4, Panel A, p. 14	Nokia cluster employees avg = 0.58% (N=1,260); employees at other firms = 0.15% (N=1,767); difference = 0.43**, p=0.019
R6	Repeatedly co-trading anonymous accounts are associated with positive returns; their average return is not significantly different from correlated employee-tippee trades	Table 5, pp. 15-16	Correlated trades avg = 0.83% (N=3,187); tippee-only avg = 0.59% (N=6,421); difference p=0.17; 783 accounts represent 7.6% of retail accounts and 7.8% of option buys
R7	Employee own-company option activity is associated with contemporaneous increases in retail option buying	Table 6, col. (1)-(2), p. 17	Employee activity indicator coefficient = 10.88** (t=2.26) on daily retail buy count (stock + day FE); 10.01** (t=2.16) with option + day FE; positive also on log retail buy volume
R8	Higher-ranked employees hold own-company options longer, but rank-specific weekly return differences are not statistically significant	Fig. 2-3, pp. 6-7; §5.1, p. 16	Median holding period >80 days for primary insiders vs. roughly 35 days for rank-and-file; rank-level return differences are statistically indistinguishable
R9	Pre-announcement option buying is most informative before positive and highly surprising earnings news	Fig. 5, p. 10; §2.2, p. 8	Approx. 3.0% weekly market-adjusted returns for positive-SUE announcements vs. approximately 0% for negative-SUE; approx. 2.5% for high-absolute-SUE vs. approx. 0.3% for low-absolute-SUE (figure point estimates)
R10	Employee own-company call buying rises before positive non-earnings information events, not before negative events	Fig. 6, p. 11; §2.3, p. 9	Positive jumps: 142 own-company vs. 63 unrelated-firm call purchases; negative jumps: 68 vs. 54
R11	Employee own-company trading is more prevalent in options than in stocks	Fig. 7, p. 12; §2.4, p. 11	Employees are 8.6% of retail option investors and 3.3% of retail option trades, vs. 1.6% of stock investors and 0.4% of stock trades
R12	Employees who buy own-company options but never own-company stock have especially informative option trades	Table F4, col. (2), cited §2.4, p. 11	About 1.00% average weekly market-adjusted return on over 1,000 purchases by 371 employees
R13	Rank-and-file employees at Nokia customer and supplier firms also earn positive returns trading Nokia options	Table 4, Panel B, p. 14; §3.3, p. 13	Customer/supplier employees 0.65% (N=820) vs. other-firm employees -0.09% (N=996); spread 0.74***, p=0.003
R14	Same-industry option purchases do not explain the supply-chain result	Table F5, cited §3.3, p. 13	No price-relevant return predictability for options on firms in the employee’s industry
R15	Direct economic links remain informative after controlling for industry knowledge, with stronger estimates after investor fixed effects	Table F6, cited §3.3, p. 13	Economically linked option trades are more informative; Column (1) effect is not statistically significant, while investor-FE Columns (2)-(3) have larger coefficients and t-statistics
R16	Employee option activity is associated with higher retail option buying volume as well as buy counts	Table 6, cols. (3)-(4), p. 17; §5.2, p. 16	Employee activity coefficients 4.036*** (t=5.25) with stock + day FE and 2.000*** (t=8.05) with option + day FE; N=106,457
R17	Risk preferences and recent losses predict employee own-company option purchases	Table 7, cols. (1)-(2), p. 18; §6.1, p. 17	Female: -1.559*** (t=-5.84), -1.538*** (t=-4.77); large losses: 0.375*** (t=3.41), 0.321*** (t=2.93); large gains are insignificant
R18	Mandatory disclosure is associated with a lower propensity for primary insiders to buy own-company options	Table 7, cols. (1)-(2), p. 18; §6.2, p. 17	Primary-insider coefficients -0.242 (t=-1.56) and -0.282* (t=-1.74); p-values range 0.07-0.11
R19	Own-company option buying exhibits habit persistence	Table 7, cols. (1)-(2), p. 18; §6.3, p. 18	Prior-year own-company option buys: 0.422*** (t=6.57), 0.448*** (t=7.42)
R20	Greater stock-market familiarity is positively associated with own-company option purchases	Table 7, cols. (1)-(2), p. 18; §6.4, p. 18	Other-stock trades 0.018*** (t=3.59), 0.018*** (t=3.27); own-company portfolio value 0.035*** (t=2.95), 0.031*** (t=2.63); other-stock portfolio value 0.126*** (t=8.54), 0.104*** (t=5.56)
R21	Own-company option purchases remain informative at monthly horizons and under factor adjustment	Table F12-F13, cited §7, p. 18	Approximately 80 bps average market-adjusted return over one month; Fama-French three-factor adjusted returns remain positive and statistically significant

Overall (paper’s conclusion). Between 3% and 9% of all retail demand in the Finnish market for single-name equity derivatives can be attributed to employees who likely have an information advantage; accounting for tipping raises this to over 15% of retail investors and 10% of open-market option purchases. Rank-and-file employees, not primary insiders or managers, are the primary source of informed retail option trading. The evidence points to a disclosure gap: most informed trading by employees goes undetected because rank-and-file employees face no mandatory disclosure requirements.

Theory / model

The paper has no formal theoretical model. It tests the information-advantage hypothesis: employees with private, price-relevant information should buy own-company call options before favorable news; the signal should be strongest before positive and unexpected earnings, weaken after employment ends, and appear in trades on firms linked through the supply chain. Correlated employee and anonymous-account trades test the additional information-transmission channel (tipping). Green, Huang, Wen and Zhou (2019) establish that employee information can be price-relevant; Augustin, Brenner and Subrahmanyam (2019) study informed options trading before corporate events. These predictions and tests are described in §§2.1-4.3, pp. 5-15. Black (1975) provides the options-leverage intuition, and Pan and Poteshman (2006) motivate using option trading to study subsequent stock returns.

The empirical return measure starts with the close-to-close underlying-stock return over an event horizon (Eq. definition in §2.1, p. 5):

$$\text{Return}_{j,t} = \frac{P_{j,t+\tau}-P_{j,t}}{P_{j,t}}$$

The main outcome subtracts the market return over the same horizon. The primary horizon is five trading days; returns and group differences are multiplied by 100. The earnings-event tests define standardized unexpected earnings as realized EPS minus EPS from four quarters earlier, scaled by the eight-quarter rolling standard deviation (§2.2, p. 8).

Method

The empirical design is descriptive: the paper compares post-trade market-adjusted returns across employer-linked and unrelated option purchases, employee ranks, current and former employees, and Nokia supply-chain ties. It also uses event-time sorts around earnings and non-earnings jumps, account-level repeated co-trading to identify potential tippees, option-day fixed-effect regressions, and employee- firm-month logit models. There is no randomized or quasi-experimental assignment.

Tipping classification. For anonymous account $a$ and employee $i$ at firm $j$, candidate pairs trade the same call option on the same day repeatedly. The baseline requires at least $k=2$ repeated co-trades and that those co-trades represent at least $p=0.1$ of account $a$‘s own-company option activity during $i$‘s employment; very active traders are filtered out (§4.1 and Appendix C, pp. 14-15). This is a lower-bound classification of potentially informed accounts, not a causal estimate of tipping.

Employee purchase model. Table 7 estimates logit models for an indicator that employee $i$ at firm $j$ buys at least one own-company call option in month $m$ (§6, Table 7, pp. 17-18):

$$\Pr(\text{Buy}_{ijm}=1\mid X_{ijm}) =\Lambda\!\left(\alpha+X_{ijm}'\beta\right), \qquad \Lambda(z)=\frac{1}{1+\exp(-z)}$$

The covariates cover gender, large recent portfolio gains and losses, primary- insider status, prior-year own-company option activity, other option and stock trading, portfolio values, age, and age squared (Table 7, p. 18). Column (1) contains 1,211,725 employee-firm-month observations; column (2) contains 639,301 observations restricted to employees who held stocks one month earlier. Warrants and observations where own-company options are not listed are excluded. The table reports t-statistics from standard errors two-way clustered by employee and firm-month. No fixed effects are reported for this specification.

Empirical specifications

Return comparisons and event splits. The paper calculates the five-trading-day market-adjusted return for each open-market call-option buy and reports means and differences for own-company versus unrelated-firm trades (Table 2, p. 7), for employee rank (Fig. 2, p. 6), current versus former employment (Table 3, p. 13), and Nokia supply-chain versus other-firm purchases (Table 4, p. 14). These are trade-level descriptive comparisons, not regressions with covariates or fixed effects. Inference uses stock-trade-date clustered standard errors and two-sided tests. The standard-error clustering and outcome construction are stated in §2.1, pp. 5-6 and in the captions to Tables 2-4. Table 4’s rank-and-file split uses 820 customer/supplier trades and 996 other-firm trades (p. 14).

Earnings and information-event specifications. Figure 4 sorts own-company and other-firm purchases by trading-day distance from the next earnings announcement and compares their subsequent one-week returns (§2.2, Fig. 4, p. 9). Figure 5 restricts the event sample to own-company purchases in the five preceding trading days and splits announcements at the median SUE and median absolute SUE; its 95% confidence intervals cluster at the firm level (Fig. 5, p. 10). For non-earnings news, a jump is an absolute market-adjusted daily return above 10%; the paper counts own-company and unrelated-firm call buys during the five trading days before and including the jump, excluding the earnings window (Fig. 6, §2.3, pp. 9-11). The latter is an event-frequency comparison, not a return regression.

Supply-chain identification checks. Consistent with the supply-chain insider trading evidence in Deuskar, Khatri and Sunder (2025), Table 4 compares Nokia call purchases by employees at Nokia customer/supplier firms with purchases by employees at other firms, then repeats the comparison for rank-and-file employees (p. 14). Table F5 is an industry-knowledge placebo: same-industry firm purchases do not predict returns (§3.3, p. 13). Table F6 isolates direct economic links within the Nokia cluster, excluding Nokia employees and own-company trades; column (1) shows no statistically significant effect and investor fixed effects in columns (2) and (3) increase the coefficient and t-statistic (§3.3, p. 13). These appendix checks are reported in the main text, but their numerical coefficients are not printed there.

Retail response regression. The numbered main-text estimating specification is Eq. (1), p. 16:

$$Y_{o,t}=\alpha+\beta X_{o,t}+\gamma_s+\delta_t+\epsilon_{o,t} \tag{1}$$

Here $o$ is an option on stock $s$ on day $t$; $Y_{o,t}$ is either the retail buy count or the natural logarithm of one plus retail buy volume, excluding own-company trades; and $X_{o,t}$ indicates at least one own-company option purchase that day. The models include underlying-stock fixed effects in columns (1) and (3), option fixed effects in columns (2) and (4), and day fixed effects in all columns. The option-day samples are 106,519 observations for count outcomes and 106,457 for volume outcomes. Standard errors are two-way clustered by underlying stock and month (Table 6, p. 17).

Main samples and logit inference. The principal current-employee sample is 4,091 own-company purchases by 890 employees at 43 firms. The Nokia supply-chain sample contains 1,260 Nokia-option purchases by 111 employees at seven firms; market-adjusted returns in these comparisons are multiplied by 100 (Table 1, p. 5; Table 4, p. 14). The Table 7 logit estimates above use employee-firm-month observations, two-way employee and firm-month clustered standard errors, and no reported fixed effects (Table 7, p. 18).

Datasets used

Dataset	Role in paper	Wiki page
Euroclear Finland (securities registry)	Daily records of all Finnish securities holdings and changes, Jan 1995-Dec 2014; source of all option and stock trades; granular trade-type identifier separates open-market purchases from other transaction types	No page yet
Alexander Incentives (executive compensation data)	Information on hundreds of employee and executive stock option plans issued by Finnish firms; provides employment-relationship identification for over 40,000 individuals; used to classify each individual as primary insider, manager, or rank-and-file employee	No page yet

Sample: January 1995 to December 2014; 43 Finnish firms with employee option trading observed; 890 current employees making 4,091 own-company call option purchases. Nokia supply-chain sub-sample: 111 employees at 7 Nokia customer and supplier firms making 1,260 Nokia option purchases.

When to read the full paper

Use the original if you are: studying the legal and institutional setting for employee options trading in Finland (Section 1.1 and Appendix A); examining robustness by derivative type (listed options vs. warrants, Appendix D) or by employer firm (Appendix E); seeking the detail of the tipping-identification algorithm (Appendix C); extending the analysis to non-earnings information events (Section 2.3, Fig. 6); or reviewing the logit analysis of determinants of option purchasing (Table 7, Section 6).

Attribution and rights

Source: peer-reviewed, Journal of Corporate Finance 98 (2026) 102963. This distillation was first extracted by an LLM on 2026-06-26 and expanded on 2026-10-04. It was checked against the source PDF by an LLM but is not independently reproduced. The CC BY 4.0 licence permits mirroring; the verbatim PDF is not hosted in this batch.

Attribution (CC BY 4.0). Vacca, Matteo. “Insider Trading with Options: Evidence from Rank-and-File Employees.” Journal of Corporate Finance 98 (2026) 102963. DOI: 10.1016/j.jcorpfin.2026.102963. (C) 2026 The Author. Published by Elsevier B.V. Licensed under CC BY 4.0. This page is an adaptation by the Institute for Automated Research: core results extracted and re-expressed; changes were made.