A number of first time visitors to trading in home price futures may be curious as to why quotes reference the “Mid” rather than the “Close” price. After all if they are MBS traders they are used to seeing the “Close” on all the other contracts they follow: T-Notes, Euro$, … Read More
Using the 10-city CUS contract as an example I’ve put together an illustration (some are not real prices) of a series of calendar spreads. The graph at the top show bids … Read More
I was recently reminded that for all of the discussions here on pricing, that I hadn’t shown a basic “how to hedge” example using the CME Home Price futures. Let me rectify that with the following illustration.
The graph to the right illustrates the P&L impact of a change in … Read More
While the headlines for this month’s release of the Case-Shiller indices look positive, many who follow this market know that the index does not reflect today’s (8/31/2010) sentiment, but measures a 3-month window, that is lagged two months.
As the illustration indicates, today’s numbers measure the results of home prices … Read More
A number of people interested in following the Case Shiller indices have focused on the 20-city index. While this is a broader index, the CME contracts are on the 10-city index. Therefore, if you’re going to trade the CUS contract, it’s important to know the differences between the two indices.… Read More
It might be useful to walk through the calculation of the CUS (The 10-city Nationwide) index once, as the index presents an opportunity for possible trading strategies. To start, the table (below) lists the weights of the index and shows the weighted average price of the 10-cities for the May … Read More
There have been some questions about – “Why use the Case Shiller index”, and “How does it differ from other indices”. Deutche Bank summarized the differences between the Case Shiller (CS), National Association of Realtors (NAR), and OFEHO indices in the attached writeup from March 2009. Please contact your DB … Read More
A good way to learn how CME Home Price futures contracts work is to watch as the front contracts reach expiration. Recall that the contracts have settlements in the current year at 3-month intervals (Feb, May, Aug, Nov) and that the contracts “Cash-Settle” – that is the value used to … Read More
The question has frequently been asked – what specific geographic exposure am I getting when I buy the New York, Miami, San Fran, or any other contracts.
Page 8 of the S&P/Case-Shiller Home Price Indices Methodology report (found in the Reports section here) lists the areas covered, by county, for … Read More