Open and Closed Positions and Stock Index Futures Volatility

29 Pages Posted: 13 Nov 2011

See all articles by Oscar Carchano

Oscar Carchano

University of Valencia - Department of Financial Economics

Julio J. Lucia

University of Valencia - Faculty of Economics

Ángel Pardo Tornero

University of Valencia - Department of Financial Economics

Date Written: November 12, 2011

Abstract

In this paper we analyze the relationship between volatility in index futures markets and the number of open and closed positions. We observe that, in general both positions are positively correlated with contemporaneous volatility, and the opposite effect is detected on the following day for all indexes. Additionally, we observe a stronger positive relationship on days characterized by extreme movements of these contracting movements dominating the market. Finally, our findings suggest that day-traders are not associated to an increment of volatility, whereas uninformed traders, both opening and closing their positions, have to do with a rise in volatility.

Keywords: volatility, open interest. trading volume

JEL Classification: C22, G1

Suggested Citation

Carchano, Oscar and Lucia, Julio J. and Pardo Tornero, Ángel, Open and Closed Positions and Stock Index Futures Volatility (November 12, 2011). Available at SSRN: https://ssrn.com/abstract=1958606 or http://dx.doi.org/10.2139/ssrn.1958606

Oscar Carchano (Contact Author)

University of Valencia - Department of Financial Economics ( email )

Avda. de los Naranjos s/n
Valencia, Valencia E-46022
Spain

Julio J. Lucia

University of Valencia - Faculty of Economics ( email )

Valencia, E-46022
Spain

Ángel Pardo Tornero

University of Valencia - Department of Financial Economics ( email )

Avda. del Tarongers, s/n
46022 Valencia
Spain

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