I included a page in the month-end recap with suggested two-sided levels for one-year puts on each of the 11 regional contracts.
The table details on the reference K19 (May 2019) contracts, a strike I selected, and then both suggested levels (in blue) as well as quotes that have been posted on the CME for four contracts. Finally, the last column is an attempt to somewhat standardize put quotes across a range of strike prices. Note that the 10-city contract has the lowest, while SFR is the highest.
There are three things to recall.
Recall #1 -that any strike can be used. I’ve just chosen here to select strikes close to spot levels.
Recall #2 -that I have impediments to posting quotes on 7 of the 11 regions. In each of those situations, I’d need to arrange a trade off-line before bringing to the exchange to clear.
Recall #3 -while I’ve posted levels for each of the CME listed options, I’m open to structuring puts on any other index. (See April 27th blog – “What might is cost to hedge Seattle home price risk”. In fact, I think that the future of home price derivatives is in put options customized across 100’s of indices.
Please feel free to contact me (firstname.lastname@example.org) if you have any questions on this blog, or if you’d care to discuss any aspect (including OTC puts) of hedging home price index risk.