Front contract is where the interest is

While there were no trades this month in expiring Aug ’15 contract, I would expect that trading in Nov ’15 should pick up.

Some thoughts/observations:

  1. There have already been 3 trades this week (BOS, CHI and SFR)
  2.  Bid/Ask spreads are already <= 2.0 on all 11 contracts
  3. Other traders are weighing in with better bids and offers (and inquiries about hedging continue to come in).
  4. The Nov expiration cycle usually has the most interest and the largest open interest
  5. The impact of the stock market gyrations might impact Sept home buying decisions (which are in the indices released for November).
  6. The yuan devaluation and bust in stock prices might be key to the debate of SFR prices going forward
  7. Changes in forward home prices may have low correlations with the stock market
  8. There may have been a Fed rate increase by Nov, or talk of higher rates, that might impact affordability
  9. The overall debate of forward home prices continues to intensify.
  10. Based on the August contract expiration, opportunities for predicting index results might be profitable (see last Last Blog )

Given my workload, I’m particularly eager to try and accommodate trading in the front contract.  While this may not have longer term hedging or investment benefits, longer-dated expirations will be more liquid with tighter and more-liquid front contracts.

Feel free to contact me (johnhdolan@homepricefutures.com) if you have any ideas or questions.