Pinning in the S&P 500 futures

Benjamin Golez and Jens Carsten Jackwerth

Journal of Financial Economics, 2012, vol. 106, issue 3, 566-585

Abstract: We show that Standard & Poor's (S&P) 500 futures are pulled toward 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 (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (11)

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Working Paper: Pinning in the S&P 500 Futures (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:106:y:2012:i:3:p:566-585

DOI: 10.1016/j.jfineco.2012.06.010

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