Why does open interest of E-mini S&P500 contract drop in middle of every month?

Discussion in 'Index Futures' started by learner88, Jan 17, 2018.

  1. learner88

    learner88

    I looked at the chart of a continuous E-mini S&P500 contract. I noticed an interesting phenomenon. Around the middle of every month from 15th to 20th, the open interest will drop. This happens every month. The volume will drop too but the drop is not as noticeable as open interest.

    Why is this so? Thank you in advance.
     
  2. Handle123

    Handle123

    Could be those who are long or short futures are hedging with SPX, which expire 3 times a week, going to where further out expire 3rd Friday.
     
  3. I'm thinking what you are seeing is open interest for each monthly contract stringed together into one chart. Naturally, OI would decline closer to expiration.
     
  4. jharmon

    jharmon

    When does your continuous contract roll? Is the OI against all contracts or just the front month? If you don't know, ask your data provider, then report back here and tell us which data you use and what their response was.
     
  5. tommcginnis

    tommcginnis

    Turn the thought around:
    "Why does open interest + volume-traded expand toward the end of the month?"

    A lot easier to answer. :)
     
    Sprout likes this.
  6. learner88

    learner88

    Thank you for the replies. My educated guess is that this has something to do with roll-over. During end of the month, traders will start to close front-month contract and initiate new contract as rollover. This explains the open interest drop during the middle of the month which I deduce is the period when most rollover take place.

    I can understand why volume expands near rollover. But I still cannot understand why should open interest expand near rollover. Shouldn't open interest contract instead?
     
  7. jharmon

    jharmon

    What is your data source? I only see a steady summed OI across all contracts around the dates you mention - no drop.
     
  8. learner88

    learner88

    I am getting end-of-date data from Reuters Datalink. I am looking at their S&P E-mini continuous contract.
    https://www.metastock.com/products/endofday/reutersdatalink/
     
  9. jharmon

    jharmon

    It sounds like they just have the OI of the front month. If you compare the individual deliveries to their continuous contract you should have an idea of when they roll. Since e-mini S&P 500 isn't deliverable prior to expiry, you'll probably find they're rolling then, but you should ask them.

    To understand what's really happening though, you should compare all of the listed deliveries and see what is happening with the OI day-to-day.
     
    tommcginnis likes this.
  10. tommcginnis

    tommcginnis

    AND you'd want to examine it by strike -- that will show you some agendas, for sure.
     
    #10     Jan 25, 2018