We analyze how informed investors trade in the options market ahead of corporate news
when they receive private, but noisy, information about the timing and impact of these
announcements on stock prices. We propose a framework that ranks options trading
strategies (option type, maturity, and strike price) based on their maximum attainable
leverage when price-taking investors face market frictions. We exploit the heterogeneity in
announcement characteristics across twelve categories of corporate events to support that …