6533b838fe1ef96bd12a3ebb

RESEARCH PRODUCT

Open and Closed Positions and Stock Index Futures Volatility

Julio J. LuciaOscar CarchanoAngel Pardo

subject

Stock index futuresMonetary economicsOpen interestTrading volumeImplied volatilityVolatility risk premiumVolatilityVolatility swapmental disordersForward volatilityVolatility smileEconomicsVolatility (finance)Futures contractpsychological phenomena and processes

description

In this paper we analyze the relationship between volatility in index futures markets and the number of open and closed positions. We observe that, although in general both positions are positively correlated with contemporaneous volatility, in the case of S&P 500, only the number of open positions has influence over the volatility. Additionally, we observe a stronger positive relationship on days characterized by extreme movements of these contracting movements dominating the market. Finally, our findings suggest that day-traders are not associated to an increment of volatility, whereas uninformed traders, both opening and closing their positions, have to do with it.

yearjournalcountryeditionlanguage
2011-07-01SSRN Electronic Journal
https://doi.org/10.2139/ssrn.1958606