Open interest (futures)

About: Open interest (futures) is a research topic. Over the lifetime, 47 publications have been published within this topic receiving 1073 citations.

Too Many Options? Theory and Evidence on Option Exchange Design

Abstract: In this paper I propose and test a model of option exchange design when investors choose among several exchange-traded options based on a trade-off between standardization costs and liquidity/transaction costs. The model employs a spatial economics approach to provide results for the existence of markets for particular option contracts on the exchange, a comparison of exchange design by a social planner and a profit-maximizing monopolist (corresponding to the idea that most derivatives exchanges centralize the design and creation of option contracts), and comparative statics which can potentially aid decision-makers in the design of option exchanges. In the empirical work, open interest is analyzed for CBOE options on the stocks in the S&P 100 index. In accordance with the model's predictions, open interest forms a previously undocumented seesaw pattern across strike prices, clustering around certain strike prices, and dropping off for the adjacent strike prices.

Submitted Article The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?

Abstract: This paper revisits the "adequacy of speculation" debate in agricultural futures markets using the positions held by index funds in the Commitment of Traders reports. Index fund positions were a relatively stable percentage of total open interest from 2006 - 2008. Traditional speculative measures do not show any material shifts over the sample period. Even after adjusting speculative indices for commodity index fund positions, values are within the historical ranges reported in prior research. One implication is that long-only index funds may be beneficial in markets traditionally dominated by short hedging.

Too many options? Theory and evidence on option exchange design

Abstract: A model of option exchange design is proposed and tested. The model allows investors to choose among several exchange-traded options based on a trade-off between standardization costs and liquidity/transaction costs. It employs a spatial economics approach to provide results for the existence of markets for particular option contracts on the exchange, a comparison of exchange design by a social planner and a profit-maximizing monopolist (corresponding to the idea that most derivatives exchanges centralize the design and creation of option contracts), and comparative statics that can potentially aid decision makers in the design of option exchanges. In the empirical work, open interest is analyzed for Chicago Board Options Exchange (CBOE) options on the stocks in the S&P 100 index. In accordance with the model's predictions, open interest forms a previously undocumented seesaw pattern across strike prices, clustering around certain strike prices, and dropping off for the adjacent strike prices. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:533–570, 2006

CFDs, forwards, futures and the cost-of-carry

Abstract: We show that contracts for difference (CFDs) may be viable substitutes for forward contracts and may have some features that are preferable to futures contracts. We develop parity relations between CFDs, forwards, and futures contracts using simple cost-of-carry arguments. We use these parity relations to consider whether exchange listed stock index CFDs might be viable substitutes for exchange listed futures contracts. Using the S&P/ASX 200 stock index we find that listed CFDs (ignoring an open interest charge) generate cash flows similar to listed futures contracts. Our analysis considers stochastic interest rates and uncertain dividend payments by the shares in the index.