This morning’s Case Shiller numbers were generally lower than where the CME market had been pricing the expiration of the Feb ’18 contract. Recall that the Feb ’18 contracts settle on the value of the indices released today. I would highlight as “surprises” the six index releases (in yellow) that were below the bid side of the CME contracts at some point in the last few days. In each case, a trader (who hypothetically knew, or could accurately project this morning’s numbers) could have sold contracts (on the bid side) and profited (at $250/point) from the lower Case Shiller index actually released today.
This is somewhat doubly surprising in that the bid/ask spreads for the expiring Feb 18 contracts was wider than normal.
Despite theses “surprises” quotes on longer-dated contracts are about flat since Monday (as measured from mid-market to mid-market). Note that while CHI and WDC contracts are lower, the DEN, SDG and SFR contracts are higher. (SFR moved higher based on a trade in X18 yesterday). Bid/ask spreads are slightly wider. There have been no trades (yet) today.
Please feel free to contact me (firstname.lastname@example.org) if you have any questions on this blog or any other aspect of hedging home price indices.