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Illiquidity is well-known to be a signi...cant determinant of stock and bond returns. We report on illiquidity premia in equity option markets. An increase in option illiquidity decreases the current option price and predicts higher expected option returns. This e¤ect is statistically and economically signi...cant. It is robust across di¤erent empirical approaches and when including various control variables. The illiquidity of the underlying stock a¤ects the option return negatively,doi:10.2139/ssrn.1784868 fatcat:uadxfhupujeqncleelzz4k3k4e