Trading volume and contract rollover in futures contracts.

Abstract

Futures trading volume data display strong quarterly seasonality due to the ‘rolling over’ of positions close to the expiry date of the near contract. This undermines the use of volume as a proxy for information arrival. By making explicit the relationship between trading volume and change in open interest, we provide an upper bound for this rollover. Empirical analysis of the S&P500, the UK Long Gilts and the Brent Crude contracts shows that our upper bound can be used to remove expiry-related seasonality from trading volume data.