Shivesh Prakash, Frank Ferstler, Nicholas Pezolano · 2026 · arXiv (Cornell University)
DOI: 10.48550/arxiv.2610.13044 · cited by 0 works (OpenAlex) · open-access PDF
FLEX options are customized exchange-traded contracts allowing participants to choose nonstandard strikes, expirations, exercise styles, and settlement terms while retaining central clearing. We investigate whether single-name FLEX activity leaves measurable footprints in regular listed-option markets and underlying equities. Using a linked dataset of FLEX consolidations, daily open-interest files, listed-option chains, equity returns, and corporate actions over 250 trading days (March 2025-March 2026) across 41 underlyings and 53 event dates, we document three primary empirical findings: (1) Matched-control difference-in-differences estimates reveal a robust post-event increase in listed-option open interest (beta = 0.3061, p = 0.0042, Benjamini-Hochberg p = 0.0168). (2) FLEX activity is strongly selected into high implied-volatility (IV) environments, concentrated in mid-price underlyings (date-fixed-effect ATM IV premium beta = 0.1235, p = 0.0030). (3) Event-day IV-minus-realized-volatility spreads predict execution-stressed short-straddle returns (beta = 0.0366, p = 0.0100). Short-lived equity return effects (CAR_0 difference of -0.85%, p = 0.0442) do not persist over 1-to-5-day horizons. Overall, FLEX activity serves primarily as an observable marker of institutional volatility demand and open-interest positioning rather than a directional stock-return predictor.
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Topics: FLEX, Equity (law), Business, Volatility (finance), Econometrics, Economics
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