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Who Trades Futures and How: Evidence from the Heating Oil Futures Market

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  • Louis Ederington

    (University of Oklahoma)

  • Jae Ha Lee

    (Sungkyunkwan University)

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    Abstract

    Dividing the 223 largest traders of heating oil futures between June 1993 and March 1997 into 11 different line-of-business groupings, we document their trading activity. We find substantial and significant differences between the 11 trader types in their propensity to take long, short, or spread positions; the terms-to-maturity of their holdings; their turnover rates; and the size of their positions. We also find that both trading volume and open-interest positions are dominated by potential hedgers but that it is not appropriate to treat traders whom the Commodity Futures Trading Commission classifies as commercials as hedgers.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 75 (2002)
    Issue (Month): 2 (April)
    Pages: 353-374

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    Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:2:p:353-374

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. Basak, Suleyman & Croitoru, Benjamin, 2006. "On the role of arbitrageurs in rational markets," Journal of Financial Economics, Elsevier, vol. 81(1), pages 143-173, July.
    2. Inci, Ahmet Can & Lu, Biao, 2007. "Currency futures-spot basis and risk premium," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(2), pages 180-197, April.
    3. Kolodziej, Marek & Kaufmann, Robert K., 2013. "The role of trader positions in spot and futures prices for WTI," Energy Economics, Elsevier, vol. 40(C), pages 176-182.
    4. Irwin, Scott H. & Sanders, Dwight R., 2012. "Testing the Masters Hypothesis in commodity futures markets," Energy Economics, Elsevier, vol. 34(1), pages 256-269.
    5. Thomas Conlon & John Cotter, 2012. "Downside risk and the energy hedger's horizon," Working Papers 201219, Geary Institute, University College Dublin.
    6. Kumar, Satish & Trück, Stefan, 2014. "Unbiasedness and risk premiums in the Indian currency futures market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 13-32.
    7. Viral V. Acharya & Lars A. Lochstoer & Tarun Ramadorai, 2011. "Limits to Arbitrage and Hedging: Evidence from Commodity Markets," NBER Working Papers 16875, National Bureau of Economic Research, Inc.
    8. Robert Weiner, 2006. "Do Birds of a Feather Flock Together? Speculator Herding in the World Oil Market," Discussion Papers dp-06-31, Resources For the Future.
    9. Miffre, Joëlle & Brooks, Chris, 2013. "Do long-short speculators destabilize commodity futures markets?," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 230-240.
    10. Chang, Ya-Kai & Chen, Yu-Lun & Chou, Robin K. & Gau, Yin-Feng, 2013. "The effectiveness of position limits: Evidence from the foreign exchange futures markets," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4501-4509.
    11. Basu, Devraj & Miffre, Joëlle, 2013. "Capturing the risk premium of commodity futures: The role of hedging pressure," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2652-2664.
    12. Gospodinov, Nikolay & Jamali, Ibrahim, 2013. "Monetary policy surprises, positions of traders, and changes in commodity futures prices," Working Paper 2013-12, Federal Reserve Bank of Atlanta.
    13. Büyükşahin, Bahattin & Robe, Michel A., 2014. "Speculators, commodities and cross-market linkages," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 38-70.

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