Research has found that the options market is:
A) efficient before controlling for transaction costs.
B) efficient after controlling for transaction costs.
C) highly inefficient.
D) None of these are correct.

Question

Quizplus · Accepted Answer

Several studies have shown that the options market is efficient after controlling for transaction costs. This means that the prices of options fully reflect all available information and there are no arbitrage opportunities. However, before accounting for transaction costs, the options market may not be efficient due to bid-ask spreads and other transaction costs.

Research Has Found That the Options Market Is