Informed Options Trading Before FDA Approves Drugs May Be Growing Problem

The Food and Drug Administration (FDA) appoints drug experts to drug advisory committees (ACs) that make approval or rejection recommendations for about half of all new drugs (usually the unique ones, such as Covid vaccines). The experts receive nonpublic technical reports from drug firms and FDA staff a month or so before ACs meet. Our recent study is the first to examine potentially informed options trading around the report creation dates (not publicly known), as well as the AC meeting dates (publicly known).

The study is important because there could be relatively large amounts of informed trading months before the … Read more