Pinning in the S&P 500 Futures

Benjamin Golez () and Jens Carsten Jackwerth ()
Additional contact information
Benjamin Golez: Universitat Pompeu Fabra, Barcelona, Spain
Jens Carsten Jackwerth: Department of Economics, University of Konstanz, Germany

No 2010-12, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: We document that S&P 500 futures finish in the proximity of the closest strike price more often on days when serial options on S&P 500 futures expire than on other days. The effect is driven by the interplay of market makers' rebalancing of delta hedges due to the time-decay of the hedges as well as in response to reselling (and early exercise) of in-the-money options by individual investors. Consistent with limits to arbitrage, we find that the effect is asymmetric and stronger above the strike price. In line with increased options activity, pinning becomes more pronounced in recent years.

Keywords: Pinning; Futures; Options; Option Expiration; Hedging (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2010-08-23
New Economics Papers: this item is included in nep-fmk
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Pinning in the S&P 500 futures (2012)
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