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When homogeneous or closely linked securities trade in multiple markets, the market where the price discovery takes place becomes vital. We investigate the information content in equity index options trading using S&P CNX Nifty Index options traded on the National Stock Exchange (NSE), India. We account for different market conditions (for example, Uptrend, Downtrend, Recovery phases) and option's moneyness which potentially can affect the venue preference of the trader and can bring anomalies in the price discovery process. We use the linear regression method to investigate the contemporaneous relationship and the bi-variate vector auto-regression (VAR) model to study information content of the markets. The contemporaneous relationship between trading activity and spot returns is found to be significant in the cases of the two most liquid contracts based on moneyness, that is, the at-the-money and out-of-the-money options. However, we find a change in magnitude and direction of this relationship when the market cycle is taken into consideration. VAR results suggest that at-themoney options are the favourite contracts of informed traders in the Indian market consistently across periods of study. However, we find the spot market is leading significantly for the in-the-money and out-of-the-money classes and across market trends.

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