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This paper examines the empirical literature on individual equity options, discussing results in areas of consensus, showing findings in areas of disagreement and providing a guide for future research (especially highlighting analyses that cannot be performed with index options). Key topics include the impact of equity option listings on the underlying stock market, option market efficiency, anomalies in equity option returns, option market microstructure, investors’ behavioral biases, option price discovery, and private information revealed in equity option markets. Some directions for future research include the determinants of equity option returns and the effect of algorithmic trading in option markets.

In this paper we investigate the interaction between liquidity and information in the options market and its impact on the pricing of the underlying asset. We model option trade duration and volume jointly, for the first time, as a natural measure of options' trading intensity and we associate it with differential degrees of information present in option trades. We report a highly significant association between option trading intensity with contemporaneous and future underlying volatility and returns, which is robust to the presence of other information measures, market factors, and structural forms.