Pinning in the S&P 500 Futures
University of Notre Dame
Jens Carsten Jackwerth
University of Konstanz - Department of Economics
December 6, 2011
Journal of Financial Economics (JFE), 106, December 2012, 566-585
We show that S&P 500 futures are pulled towards the at-the-money strike price on days when serial options on the S&P 500 futures expire (pinning), and are pushed away from the cost-of-carry adjusted at-the-money strike price right before the expiration of options on the S&P 500 index (anti-cross-pinning). These effects are driven by the interplay of market makers’ rebalancing of delta hedges due to the time-decay of those hedges as well as in response to reselling (and early exercise) of in-the-money options by individual investors. The associated shift in notional futures value is at least $115 million per expiration day.
Number of Pages in PDF File: 75
Keywords: pinning, futures, options, option expiration, hedging
JEL Classification: G12, G13
Date posted: August 25, 2010 ; Last revised: February 13, 2013
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 1.140 seconds