Institutional Trading and Stock Pinning

18 Pages Posted: 16 Feb 2019

See all articles by Francis Cai

Francis Cai

William Paterson University

Ge Zhang

William Paterson University - Cotsakos College of Business

Lianzan Xu

William Paterson University

Date Written: December 8, 2018

Abstract

This paper investigates the impact of institutional trading activity on stock pinning effect for both monthly and weekly equity options. After the introduction of weekly options over seven years, it shows the pinning effect with weekly options is stronger in comparison to monthly options. Furthermore, this paper shows that stock pinning remains pervasive on the expiration days and the effect is powerful with higher concentrated firm proprietary trading. We explore and find evidence that hedge rebalancing by firm traders might be a possible cause for stock pinning on option expiration days. The higher the fraction of firm trading, the more significant the clustering effect is.

Keywords: Stock Pinning, Weekly Options, Institutional Trading, Stock Clustering

JEL Classification: G10, G12, G14

Suggested Citation

Cai, Francis and Zhang, Ge and Xu, Lianzan, Institutional Trading and Stock Pinning (December 8, 2018). Available at SSRN: https://ssrn.com/abstract=3333226

Francis Cai

William Paterson University ( email )

300 Pompton Road
Wayne, NJ 07470-2152
United States
973-720-2178 (Phone)
973-720-2809 (Fax)

Ge Zhang (Contact Author)

William Paterson University - Cotsakos College of Business ( email )

1600 Valley Road
Wayne, NJ 07470
United States

Lianzan Xu

William Paterson University ( email )

300 Pompton Road
Wayne, NJ 07470-2152
United States
973-720-2963 (Phone)
973-720-3722 (Fax)

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