Feb ’14/’15 Calendar Spreads by regions (If you blog it, they will come!)

In what was a very gratifying (to me) set of actions, one (or some?) trader seems to have taken my comments on the Feb ’14/’15 calendar spread for the HCI contract (CUS 10-city index) Feb cycle calendar spreadsand expanded that approach into two-sided calendar quotes on all ten regional contracts for the Feb ’14/”15 markets.  THANK YOU!

As such we can now observe bid/ask bands that should frame discussions on YOY changes for the ten regional Case Shiller indices between Dec 2013 and Dec 2014.  (Note that I use “bands”  and “frame” to suggest that consensus must lie somewhere between the bid and offered level – as otherwise someone with an outlier view would act on either the bid or offer).

This is a great start.  I’d encourage other traders to review the implied annualized percent change in YOY levels and if they have strong views, narrow these bid/ask spreads.  Trade and/or adding volume to either side of these markets will also help.

In the meantime, we can leap forward from yesterday’s observations about the market as a whole to interpretations of each of these ten markets.

In another example of Newton’s “A body in motion…” observations, the markets that have been the strongest (e.g. MIA, SDG, SFR) remain the strongest (forecasted) and the ones that have been weakest (e.g. BOS, CHI, and NYM) are expected to remain the (relative) weakest.  However even the market with the lowest implied YOY % gain (LAX at 3.7% on the offered side) still shows positive YOY gains.  (Where are you 2014 bears?)

While some may view shun calendar spreads as a derivative of outright markets, I’m happy to go one step further and to facilitate anyone looking to do a calendar pairs trade.  That is, if you think SFR is going to outperform LAX for 2014 by more than say 2.0%, we might structure a set of calendar spreads that reflect such views.  (Note that come Feb 25th, with the expiration of the G14 contracts that one could also express that view with a straightforward intercity spread trade).

Anyway, thanks again to all that posted enhancements to the G14_G15 calendar spreads and/or the G15 outright markets.  Much food for thought.

If you do have aspects of these calendar spreads, or other trades that you’d like to have touted, please contact me (johnhdolan@homepricefutures.com)