Nov Recap of CME Case Shiller futures activity posted

The November recap of activity in the CME Case Shiller home price index futures is posted in the Reports section (or you can link here).

Key observations include:

–Activity picked up dramatically with 41 trades in November (which was the highest since May ‘14).  Trading occurred throughout the month (except, in an unusual twist, after CS #s). There were trades in 6 regions (including 29 in SFR!) and 8 expirations.

–Open interest fell to 38 as ~25 Nov ‘16 contracts matured. Weighted Avg. length to expiration of OI dramatically lengthened to 1.5 years.

–Bids were lower across all regions (except DEN).

–Forward curves flattened noticeably (particularly in Calif)

–Bid/ask spreads widened (surprisingly, primarily in 2017 expirations)

–While trading volume was higher (and more traders seemed to be putting in bids and offers), the trades that did occur reflect current market practices, challenges, and (maybe) opportunities.

–On the “practices” front, some of the trades were arranged off-exchange then executed on the exchange.  I’m open to negotiating a higher numbers of lots, and/or a price inside the quoted levels, if traders care to chat.  (This is not a necessary step but I’ve been >50% of open interest for months and am always looking to facilitate trades.)

–Also on the practices front, a large # of trades were facilitated by calendar spread orders.  I’d encourage greater use of calendar spreads as your CS order might help another get executed.

–From a trading perspective there seemed to be two themes that lead to trading:  a) an interest by at least one trader in selling longer-dated SFR contracts (where we had the first X20 trade for any contract) and b) a variety of K17 trades (where there may have been a debate about seasonality and/or near-term home price moves as a result of the election (and/or interest rates).

–The SFR trades highlighted the lack of depth in the market, but may be an opportunity as forward SFR (and SDG) prices have dropped (for the first time) to lower HPA than the CUS-10 average.

–Option trading was quiet, although I arranged one OTC trade.  I’m open to doing more.  (In a related note, the CME may be making progress on opening up electronic trades of options to more than  4 current regions).

–IC (intercity) spread quotes moved with the underlying (and I’m not aware of any IC trades in Nov.)

Feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions.  I’d like to capitalize on November volume and keep the momentum going.  There are number of factors related to home prices (e.g. interest rates, wealth effect, interpretations of President-elect Trump’s policies) that should prompt debate on the level of HPA.  I’d like to facilitate that debate here (for those looking to trade, or offer opinions).  The more activity the better the CME prices will be in forecasting sentiment and hedging activity.