Informed options trading prior to FDA announcements

We find that pre-announcement implied volatility spreads and options trading activity are abnormally elevated can predict Food Drug Administration (FDA) announcement date stock returns. The effect is more pronounced in firms with higher levels of information asymmetry lower-quality corporate governance suggesting some traders informed advance the details affect price impact FDA news. provide first examination prior to announcements during a 21-year period. Our findings have implications for regulators, investors relevant firms.