With all the concerns about home prices, I thought that it would be useful to start a (monthly?) effort to foster discussion on the price of buying down-side price protection on each of the 11 regions traded on the CME.
The table below shows suggested bids and offers on puts on the May ’19 (K19) Case Shiller home price index futures contracts that are quoted on the CME. The strike levels (that are close to spot index) are highlighted in yellow. Suggested bids and offers are shown in blue. The percent of put premium to spot is in the far right column, to somewhat adjust for different levels of spot index. The degree to which the strike is below the futures contract quotes will also influence these results. (BTW – the futures prices shown are from April 19th.)
While I’ve shown strikes near spot levels, and puts on the May ’19 contracts, any 5-point strike can be quoted, for any expiration. In addition, calls can be quoted. Trades can be teed up electronically in the HCI (sometimes labeled CUS), CHI, LAX and NYM contracts, but the other seven contracts need to be set up off-exchange and then cleared.
Also, any permutation of underlying/option trades are possible. I’m open to quoting straddles, strangles, bull- and bear-spreads, as well as delta-neutral volatility plays.
While these trades can all be done on the CME, I’m also open to (modest-sized) trades on any other housing index via an OTC trade.
Feel free to contact me (email@example.com) to discuss this blog or any aspect of hedging home price index risk.