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I came across this research paper that shows that skewness derived from options surfaces can help explain the cross section of returns. https://pubsonline.informs.org/doi/10.1287/mnsc.2015.2379

Are there any other similar papers that have other option surface related factors that can explain cross section returns? For example, change in IV or put call ratio etc?

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There is plenty of research! Below I list but a few examples of options being used to predict future stock returns (either in aggregate or in the cross-section). Of course, you can also use current option prices to predict future option returns (or other asset classes).

Implied Volatility

One set of papers considers variable derived from option implied volatilities. Examplary predictors include changes or spreads in implied volatility. You can apply these predictors also to the cross-section of bond returns.

Expected Returns

A recent literature recovers (lower bounds for) expected stock returns from option prices. This works for aggregate indices and for single stocks. Very cool papers in my opinion!

Aggregate Returns

Another literature identifies variance risk premiums or tail risk premiums as predictors for aggregate stock returns.

And much more

And, of course, there is so much more work!

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    $\begingroup$ Nice selection, thanks $\endgroup$
    – oronimbus
    Mar 22 at 8:13

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