Delta Implied Volatility Spread, Short Selling, and Abnormal Stock Performance: Evidence from the Put-to-Call Volume Ratio in the Tehran Stock Exchange

In recent years, derivatives markets have emerged as important sources of latent information about investor behavior, and their role in explaining stock return dynamics especially in emerging markets has gained growing attention. This study aims to assess how key derivatives-based indicators, including the delta implied volatility spread, the put-to-call volume ratio, and short-selling activity, influence abnormal stock returns in the Tehran Stock Exchange and Iran Fara Bourse from March 2016 to September 2024. To achieve a more precise understanding of how these variables shape different parts of the return distribution, we employ quantile regression and strengthen the robustness of the estimates using BCa and Wild bootstrap procedures. The empirical findings show that option-based indicators contain meaningful informational content, and their effects on abnormal returns differ substantially across quantiles. Furthermore, the interaction terms demonstrate that the joint presence of the delta–implied volatility spread, the normalized put-to-call ratio, and the intensity of short-selling activity significantly enhances the model’s explanatory power in the extreme parts of the return distribution. Overall, the results suggest that incorporating derivatives-market indicators alongside advanced statistical techniques provides a deeper understanding of risk-transmission mechanisms and investor behavior in emerging markets during periods of heightened uncertainty and market adjustment.