Pinning in the S&P 500 futures | Zendy

Benjamin Golez | Zendy; Jens Carsten Jackwerth | Zendy

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Pinning in the S&P 500 futures

Author(s) -

Benjamin Golez,

Jens Carsten Jackwerth

Publication year - 2012

Publication title -

journal of financial economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 11.673

H-Index - 256

eISSN - 1879-2774

pISSN - 0304-405X

DOI - 10.1016/j.jfineco.2012.06.010

Subject(s) - futures contract , notional amount , expiration date , expiration , economics , value (mathematics) , monetary economics , financial economics , finance , medicine , mathematics , chemistry , statistics , food science , respiratory system

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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