Futures Volatility and Volume traded as it gets to expiration date?
July 10th, 2008
beeforsalmon asked:
For something like an Interest rates future, does the volume traded and volatility of the future decrease as it gets to the expiration date. For equity futures, volatility and volume increase but for something like interest rates, unless there is a major shock, would traders be more concerned with taking a view on futures in a year or 6 months than trading on one with a week to expiration. Thanks for the help
CATERINA
For something like an Interest rates future, does the volume traded and volatility of the future decrease as it gets to the expiration date. For equity futures, volatility and volume increase but for something like interest rates, unless there is a major shock, would traders be more concerned with taking a view on futures in a year or 6 months than trading on one with a week to expiration. Thanks for the help
CATERINA
You are correct….
When you are that close to experition there is not much volitility in that the rate is pretty much set with one week to go.
Also, the volume decreases in that you are better off holding onto your position to avoid transaction costs.