We compare clientele and information share in weekly- (Weeklys) and monthly-expiring options (Monthlys) on the S&P 500 index. Striking dissimilarities between the two instruments are found, most apparent being the much smaller trade size and substantially higher implied volatility in Weeklys, consistent with both speculation and event trading. Additionally, the price discovery contribution of Weeklys, albeit modest when compared to the underlying index itself, is substantially larger than that of Monthlys. The cumulative evidence points to an increasingly segmented options market. Thus, studies employing only standard options to investigate price discovery will likely underestimate the informational role of options.

We decompose US Treasury bid-ask spreads into inventory, adverse selection and order processing costs by using the fact that inventory trades have different effects on spreads than do proprietary trades. We exploit this asymmetry and develop a technique to identify the three components of the spread in order to test three hypotheses: dealers make larger changes to inventory (1) following macroeconomic announcements (2) at the start and toward the end of the New York trading hours, and (3) when transaction sizes are relatively large. We test these predictions using GovPX data for on-the-run 2-year and 10-year Treasury Notes. All three predictions are supported. We also assess how primary dealers react to the Federal Reserve’s open market operations (OMOs). Our findings reveal interesting intraday patterns in the inventory component for both securities.