75 Pages Posted: 25 Aug 2010 Last revised: 13 Feb 2013
Date Written: December 6, 2011
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.
Keywords: pinning, futures, options, option expiration, hedging
JEL Classification: G12, G13
Suggested Citation: Suggested Citation
Golez, Benjamin and Jackwerth, Jens Carsten, Pinning in the S&P 500 Futures (December 6, 2011). Journal of Financial Economics (JFE), 106, December 2012, 566-585. Available at SSRN: https://ssrn.com/abstract=1664261 or http://dx.doi.org/10.2139/ssrn.1664261