Open and Closed Positions and Stock Index Futures Volatility
29 Pages Posted: 13 Nov 2011
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: Suggested Citation
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