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Hedging pressure and liquidity provision in commodity options markets

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  • Tianyang Zhang

Abstract

This study examines hedging pressure and liquidity provision in commodity options markets using data from the weekly US Commodity Futures Trading Commission Commitments of Traders and Disaggregated Commitments of Traders reports. The “options‐only” reports are obtained from futures‐only and futures‐and‐options‐combined reports. We build the futures price series based on commodity options expiration dates. There are significant hedging pressure effects in commodity options markets. The empirical results indicate that commercials (swap dealers) provide liquidity to non‐commercials (money managers) in commodity options markets in the short run.

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  • Tianyang Zhang, 2022. "Hedging pressure and liquidity provision in commodity options markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(7), pages 1212-1233, July.
    • Handle: RePEc:wly:jfutmk:v:42:y:2022:i:7:p:1212-1233
    DOI: 10.1002/fut.22327
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    References listed on IDEAS

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