Pinning in the S&P 500 futures |
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Authors: | Benjamin Golez Jens Carsten Jackwerth |
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Affiliation: | 1. Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556, USA;2. University of Konstanz, PO Box 134, 78457 Konstanz, Germany |
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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. |
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Keywords: | G11 G12 G13 |
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