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Cheap Options Are Expensive

Alexei Boulatov et al.

Review of Asset Pricing Studies2026https://doi.org/10.1093/rapstu/raag001article
AJG 3ABDC A*
Weight
0.50

Abstract

We show that demand pressure from retail investors makes options on low-price stocks relatively expensive—delta-hedged options on low-price stocks underperform those on high-price stocks by 0.63% per week for calls and 0.36% for puts. Natural experiments corroborate this finding: options become more expensive following stock splits, options on mini indices are more expensive than those on main indices, and mini contract options are more expensive than standard options. We attribute our findings to retail investors’ preference for skewness and divergence of opinion. Limits to arbitrage and strategic quote setting by market makers contribute to, but do not fully explain, this effect. (JEL G13, G14)

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https://doi.org/https://doi.org/10.1093/rapstu/raag001

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@article{alexei2026,
  title        = {{Cheap Options Are Expensive}},
  author       = {Alexei Boulatov et al.},
  journal      = {Review of Asset Pricing Studies},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1093/rapstu/raag001},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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