{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,26]],"date-time":"2026-10-26T17:40:11Z","timestamp":1793036411423,"version":"4.5.0"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":41,"publisher":"Elsevier BV","license":[{"start":{"date-parts":[[2026,1,1]],"date-time":"2026-01-01T00:00:00Z","timestamp":1767225600000},"content-version":"unspecified","delay-in-days":0,"URL":"https:\/\/www.uspto.gov\/ip-policy\/copyright-policy\/copyright-basics"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>Dozens of firm characteristics predict the returns on delta-hedged equity options, with different explanations for different characteristics. I show that most of them are the same anomaly. Their long-short portfolios lose money because they hold options on volatile stocks, and options on volatile stocks are repriced every month when the standard contracts expire and positions roll into the next maturity. Implied volatility alone accounts for four fifths of the average long-short return, and for nearly all of it on the two rollover days; among stocks of similar volatility, the idiosyncratic-volatility and maximum-return anomalies point the other way. What the expiration weekend costs the holder of a contract that does not expire, beyond what any weekend costs, is not time decay or realized variance but a missing recovery in implied volatility, the rise that every other weekend shows and this one does not; it grows with volatility and with the open interest that rolls. The anomalies are not separate puzzles but different exposures to one recurring repricing, and each portfolio's exposure is known a month ahead, from which stocks are volatile and when the contracts expire.<\/jats:p>","DOI":"10.2139\/ssrn.7458380","type":"posted-content","created":{"date-parts":[[2026,9,16]],"date-time":"2026-09-16T18:59:52Z","timestamp":1789585192000},"source":"Crossref","is-referenced-by-count":0,"title":["The Common Source of Option Return Anomalies"],"prefix":"10.2139","author":[{"given":"Daniil","family":"Gerchik","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","reference":[{"issue":"2","key":"ref1","doi-asserted-by":"crossref","first-page":"527","DOI":"10.1093\/rfs\/hhg002","article-title":"Delta-Hedged Gains and the Negative Market Volatility Risk Premium","volume":"16","author":"G Bakshi","year":"2003","journal-title":"Review of Financial Studies"},{"issue":"1","key":"ref2","doi-asserted-by":"crossref","first-page":"101","DOI":"10.1093\/rfs\/16.1.0101","article-title":"Stock Return Characteristics, Skew Laws, and the Differential Pricing of Individual Equity Options","volume":"16","author":"G Bakshi","year":"2003","journal-title":"Review of Financial Studies"},{"issue":"9","key":"ref3","doi-asserted-by":"crossref","first-page":"3548","DOI":"10.1093\/rfs\/hhad017","article-title":"Option Return Predictability with Machine Learning and Big Data","volume":"36","author":"T G Bali","year":"2023","journal-title":"Review of Financial Studies"},{"issue":"2","key":"ref4","doi-asserted-by":"crossref","first-page":"283","DOI":"10.1093\/rapstu\/raag001","article-title":"Cheap Options Are Expensive","volume":"16","author":"A Boulatov","year":"2026","journal-title":"Review of Asset Pricing Studies"},{"issue":"2","key":"ref5","doi-asserted-by":"crossref","first-page":"109","DOI":"10.1016\/1058-3300(95)90001-2","article-title":"The Impact of Equity Option Expirations on the Prices of Non-Expiring Options","volume":"4","author":"J B Broughton","year":"1995","journal-title":"Review of Financial Economics"},{"issue":"12","key":"ref6","doi-asserted-by":"crossref","first-page":"7866","DOI":"10.1287\/mnsc.2020.3803","article-title":"The Calendar Effects of the Idiosyncratic Volatility Puzzle: A Tale of Two Days?","volume":"67","author":"J Cao","year":"2021","journal-title":"Management Science"},{"issue":"1","key":"ref7","doi-asserted-by":"crossref","first-page":"231","DOI":"10.1016\/j.jfineco.2012.11.010","article-title":"Cross Section of Option Returns and Idiosyncratic Stock Volatility","volume":"108","author":"J Cao","year":"2013","journal-title":"Journal of Financial Economics"},{"issue":"3","key":"ref8","first-page":"2271","article-title":"Option Profit and Loss Attribution and Pricing: A New Framework","volume":"22","author":"P Carr","year":"2009","journal-title":"Review of Financial Studies"},{"key":"ref9","doi-asserted-by":"crossref","first-page":"207","DOI":"10.1561\/104.00000112","article-title":"Open Source Cross-Sectional Asset Pricing","volume":"11","author":"A Y Chen","year":"2022","journal-title":"Critical Finance Review"},{"issue":"2","key":"ref10","doi-asserted-by":"crossref","first-page":"595","DOI":"10.1093\/rfs\/hhx089","article-title":"The Factor Structure in Equity Options","volume":"31","author":"P Christoffersen","year":"2018","journal-title":"Review of Financial Studies"},{"issue":"3","key":"ref11","first-page":"1035","article-title":"Measuring Mutual Fund Performance with Characteristic-Based Benchmarks","volume":"52","author":"K Daniel","year":"1997","journal-title":"Journal of Finance"},{"issue":"3","key":"ref12","doi-asserted-by":"crossref","first-page":"1377","DOI":"10.1111\/j.1540-6261.2009.01467.x","article-title":"The Price of Correlation Risk: Evidence from Equity Options","volume":"64","author":"J Driessen","year":"2009","journal-title":"Journal of Finance"},{"key":"ref13","article-title":"Too Good to Be True: Look-Ahead Bias in Empirical Options Research","author":"J Duarte","year":"2026","journal-title":"Review of Financial Studies"},{"issue":"5","key":"ref14","doi-asserted-by":"crossref","first-page":"3581","DOI":"10.1111\/jofi.13365","article-title":"Very Noisy Option Prices and Inference Regarding the Volatility Risk Premium","volume":"79","author":"J Duarte","year":"2024","journal-title":"Journal of Finance"},{"issue":"2","key":"ref15","doi-asserted-by":"crossref","first-page":"514","DOI":"10.1017\/S002210902100003X","article-title":"Maturity Driven Mispricing of Options","volume":"57","author":"A Eisdorfer","year":"2022","journal-title":"Journal of Financial and Quantitative Analysis"},{"issue":"1","key":"ref16","doi-asserted-by":"crossref","first-page":"75","DOI":"10.1093\/rfs\/hhz054","article-title":"Dash for Cash: Monthly Market Impact of Institutional Liquidity Needs","volume":"33","author":"E Etula","year":"2020","journal-title":"Review of Financial Studies"},{"issue":"3","key":"ref17","doi-asserted-by":"crossref","first-page":"607","DOI":"10.1086\/260061","article-title":"Risk, Return, and Equilibrium: Empirical Tests","volume":"81","author":"E F Fama","year":"1973","journal-title":"Journal of Political Economy"},{"key":"ref18","author":"C Gao","year":"2026","journal-title":"Maturity Structure and Its Impact on Option Prices"},{"key":"ref19","article-title":"Option Returns: A Tale of the Expiration Rollover Day","volume":"4595840","author":"P A Garcia-Ares","year":"2025","journal-title":"SSRN"},{"issue":"10","key":"ref20","doi-asserted-by":"crossref","first-page":"4259","DOI":"10.1093\/rfs\/hhp005","article-title":"Demand-Based Option Pricing","volume":"22","author":"N G\u00e2rleanu","year":"2009","journal-title":"Review of Financial Studies"},{"issue":"2","key":"ref21","doi-asserted-by":"crossref","first-page":"310","DOI":"10.1016\/j.jfineco.2009.01.001","article-title":"Cross-Section of Option Returns and Volatility","volume":"94","author":"A Goyal","year":"2009","journal-title":"Journal of Financial Economics"},{"issue":"6","key":"ref22","doi-asserted-by":"crossref","first-page":"1783","DOI":"10.1093\/rfs\/hhae087","article-title":"Can Equity Option Returns Be Explained by a Factor Model? IPCA Says Yes","volume":"38","year":"2025","journal-title":"Review of Financial Studies"},{"key":"ref23","author":"F Hollstein","year":"2025","journal-title":"Working paper, SSRN 5292010, version of"},{"issue":"3","key":"ref24","doi-asserted-by":"crossref","first-page":"835","DOI":"10.1093\/rfs\/hhaf060","article-title":"Common Factors in Equity Option Returns","volume":"39","author":"A R Horenstein","year":"2026","journal-title":"Review of Financial Studies"},{"issue":"5","key":"ref25","doi-asserted-by":"crossref","first-page":"2019","DOI":"10.1093\/rfs\/hhy131","article-title":"Replicating Anomalies","volume":"33","author":"K Hou","year":"2020","journal-title":"Review of Financial Studies"},{"issue":"3","key":"ref26","doi-asserted-by":"crossref","first-page":"1025","DOI":"10.1017\/S0022109019000310","article-title":"Volatility and Expected Option Returns","volume":"55","author":"G Hu","year":"2020","journal-title":"Journal of Financial and Quantitative Analysis"},{"issue":"2","key":"ref27","article-title":"Working paper, SSRN 1364721, version of August 30","volume":"73","author":"C S Jones","year":"2012","journal-title":"Journal of Finance"},{"issue":"3","key":"ref28","doi-asserted-by":"crossref","first-page":"501","DOI":"10.1016\/j.jfineco.2019.05.001","article-title":"Characteristics Are Covariances: A Unified Model of Risk and Return","volume":"134","author":"B T Kelly","year":"2019","journal-title":"Journal of Financial Economics"},{"issue":"2","key":"ref29","doi-asserted-by":"crossref","first-page":"673","DOI":"10.1111\/jofi.12380","article-title":"Order Flow and Expected Option Returns","volume":"71","author":"D Muravyev","year":"2016","journal-title":"Journal of Finance"},{"issue":"1","key":"ref30","doi-asserted-by":"crossref","first-page":"219","DOI":"10.1016\/j.jfineco.2018.12.006","article-title":"Why Do Option Returns Change Sign from Day to Night?","volume":"136","author":"D Muravyev","year":"2020","journal-title":"Journal of Financial Economics"},{"issue":"11","key":"ref31","doi-asserted-by":"crossref","first-page":"4973","DOI":"10.1093\/rfs\/hhaa010","article-title":"Options Trading Costs Are Lower than You Think","volume":"33","author":"D Muravyev","year":"2020","journal-title":"Review of Financial Studies"},{"key":"ref32","article-title":"Anomalies on a Schedule: Month-End Liquidity Demand and the Factor Zoo","volume":"6909918","author":"D Nathan","year":"2026","journal-title":"SSRN"},{"issue":"1","key":"ref33","doi-asserted-by":"crossref","first-page":"297","DOI":"10.1016\/j.jfineco.2021.03.006","article-title":"Mispricing, Short-Sale Constraints, and the Cross-Section of Option Returns","volume":"141","author":"L S Ramachandran","year":"2021","journal-title":"Journal of Financial Economics"},{"issue":"2","key":"ref34","doi-asserted-by":"crossref","first-page":"171","DOI":"10.1016\/j.jfineco.2014.04.005","article-title":"Asset Pricing: A Tale of Two Days","volume":"113","author":"P Savor","year":"2014","journal-title":"Journal of Financial Economics"},{"issue":"4","key":"ref35","doi-asserted-by":"crossref","first-page":"2144","DOI":"10.1287\/mnsc.2023.4796","article-title":"Default Risk and Option Returns","volume":"70","author":"A Vasquez","year":"2024","journal-title":"Management Science"},{"key":"ref36","author":"Z Wang","year":"2025","journal-title":"Flow-Induced Demand Pressure from Option-Trading ETFs"},{"issue":"1","key":"ref37","doi-asserted-by":"crossref","first-page":"133","DOI":"10.1093\/rapstu\/raaf012","article-title":"Cross-Sectional Variation of Risk-Targeting Option Portfolios","volume":"16","author":"L Wu","year":"2026","journal-title":"Review of Asset Pricing Studies"},{"issue":"6","key":"ref38","doi-asserted-by":"crossref","first-page":"1822","DOI":"10.1093\/rfs\/hhaf016","article-title":"Common Pricing of Decentralized Risk: A Linear Option Pricing Model","volume":"38","author":"L Wu","year":"2025","journal-title":"Review of Financial Studies"},{"issue":"3","key":"ref39","doi-asserted-by":"crossref","first-page":"1394","DOI":"10.1093\/rfs\/hhab067","article-title":"Option Return Predictability","volume":"35","author":"X Zhan","year":"2022","journal-title":"Review of Financial Studies"},{"key":"ref40","volume":"14","journal-title":"Attribution of the delta-hedged call return, by decile and window Decile Other days Rollover days"},{"key":"ref41","journal-title":"This table reports, by implied-volatility decile, the delta-hedged call return over each window and its four parts, in percent of the initial investment per month. Each daily gain is attributed by repricing the contract with Black-Scholes at its OptionMetrics implied volatility, updating time, then the stock price, then volatility. Theta is the change from the passage of time net of the financing charge, Gamma the change from the stock's move net of the hedge, and \u0398 + \u0393 their sum. Vega is the change from the contract's own implied volatility, and Residual the change in the gap between the quoted midpoint and the model price"}],"container-title":[],"original-title":[],"deposited":{"date-parts":[[2026,10,26]],"date-time":"2026-10-26T17:00:15Z","timestamp":1793034015000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.ssrn.com\/abstract=7458380"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026]]},"references-count":41,"URL":"https:\/\/doi.org\/10.2139\/ssrn.7458380","relation":{},"subject":[],"published":{"date-parts":[[2026]]},"subtype":"preprint"}}