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How trading in commodity futures option markets impacts commodity futures prices
Author(s) -
Luo Xingguo,
Lin Yuting,
Yu Xiaoli,
He Feng
Publication year - 2021
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22221
Subject(s) - futures contract , position (finance) , commodity pool , commodity , contango , economics , forward market , financial economics , hedge , spread trade , normal backwardation , monetary economics , finance , market liquidity , institutional investor , ecology , corporate governance , open end fund , passive management , biology , fund of funds
Abstract This paper investigates the information content of the futures option markets trading activities in determining commodity futures returns. Our findings suggest that position changes in the commodity futures option markets provide incremental predictive power for commodity futures returns in addition to the effects of commodity futures markets position changes. Particularly, for both commercial traders and noncommercial traders, options position changes impact the futures price in the same direction as futures position changes. Furthermore, the nonmomentum of position changes of options market contributes overwhelmingly relative to the idiosyncratic risk and hedging pressure in the case of noncommercial trading.