Recap for March – CME Home Price Index Contracts posted

I’ve posted a recap of activity in the CME Case Shiller home price index futures (and options) for March in the Reports section (or you can link here).  The report contains tables of prices, price changes, graphs of historical and forward prices, and quotes on inter-city and calendar spreads.  Implied HPAs are shown for all 11 regions as well as open interest and historical volumes.

March was another quiet month (but busy in my “day job”).  Highlights from the month include:

–There were 9 futures contracts traded in March in 3 regions (HCI, CHI, and SFR) across 3 expirations.  There were no options trades.

–Activity remains slow with most bid/ask activity in the SFR contracts.

–For March, bids and offers were higher across most regions (except lower in CHI, WDC). Bid/ask spreads were flat across expirations.

–New front contract (K18) bid/ask spreads are wider than typical, given two months to expiration.   California contracts quoted at widest b/a.

–OI on futures rose slightly to 33.  OI on options unchanged at 2.

–Forward implied HPA are rising as gains in March were reflected in stronger bids on calendar spreads.  (Still my sense is that forward prices are biased lower by an imbalance of hedgers vs. natural longs).

–Growing interest from option buyers.

–New home price index futures contract for Paris to be rolled out this summer.

Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions from this recap, or any other aspect of hedging home price indices.

John

Quiet market reaction to Mar CS #’s

Quotes on the CME home price index futures were little changed after the release of Tuesday’s Case Shiller numbers.  The table shows prices from the Nov ’18 contract, from Mar 26th (the day before #’s were announced) and as of the end of trading on Mar 27th.    Changes in mid-market levels were flat, but some contracts were more than a point higher (e.g. LAX and SFR) and while some were more than a point lower (e.g. CHI and WDC).  

Bid/ask spreads widened Tuesday, but contracted slightly on Wednesday.

The price levels on longer-dated contracts rose slightly, but are still consistent with declining, but positive HPA out past 2020.

Trading has been quiet with only 8 trades in the last week.

Feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions on this blog, or any other aspect of hedging home price indices.

Feb recap posted

I’ve posted a recap of activity in the CME Case Shiller home price index futures for February in the Reports section, or you can link here.

Activity remains very quiet, and price have been stable, despite huge gyrations in the stock market.

Key points from the Feb recap include:

–There were 3 futures contracts traded in February in 2 regions across 1 expiration.  There were no options trades.

–Activity remains slow with most bid/ask activity in the SFR contracts.

–For Feb, bids and offers were mixed across regions.  Bid/ask on expirations tightened slightly  (except Feb ’19).

–New front contract (K18) bid/ask spreads are about typical with 3 months to go, except SDG.

–OI on futures and options fell as 6 futures and 17 options contracts expired.

–Forward implied HPA are falling, and very mixed across contracts.  (I sense that forward prices are biased lower by an imbalance of hedgers vs. natural longs).

–Growing interest from option buyers.

–New home price index futures contract for Paris to be rolled out this summer.

Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions from this report, or on any aspect of hedging home price indices.

Thanks,  John

 

CME post Feb CS #’s

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 (johnhdolan@homepricefutures.com) if you  have any questions on this blog or any other aspect of hedging home price indices.

John

 

 

“mini” recap of Jan activity in CME CS futures

I posted a (late) recap of activity in the CME Case Shiller home price index futures for Jan today, so that people can have a more recent reference point to compare quotes before and/or after Tuesday CS #’s. You can see the “mini” recap in the Reports section, or view here.

To summarize the key observations:

–There were 9 futures contracts traded in January in 4 regions across 3 expirations.  There were no options trades.

–Activity remains slow with most activity in the SFR contracts.

–For Jan, bids and offers generally rose across most regions and expirations (except CHI, and SDG).

–Bid/ask spreads were about unchanged during Jan.

–Front contract (G18) bid/ask spreads have narrowed, except in SDG/SFR.

–OI on futures inched higher from 34 in Dec to 36 (a/o Feb 22). OI for options remains unchanged at 17.

I hope to get a recap for February posted on a more timely basis, but will not get to it until at least March 5th (when I return from a ski trip).

Meanwhile, I’d share that I moved to Washington DC this past week, and would love to meet with anyone in the area who has an interest in this sector.  Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions from this recap, or on the subject of hedging home price indices.

Thanks,  John

CME Market reaction to CS #’s (Jan 2018 release)

Quotes on CME Case Shiller home price index futures were generally higher on Tuesday, albeit with wider bid/asked spreads, following the January release of the Case Shiller #’s for November.  As highlighted in table below, the big movers were the California contracts (w/ SFR much higher, and SDG lower) and CHI (much lower).  (Note, I’m using the Nov ’18 – X18 – contracts for illustration.  In general price movements were of a similar direction along the expiration curves, with longer-dated contracts, particularly SFR offerings, moving more than shorter-dated contracts.)

There were 3 trades -an outright CHI trade, and a CUS (10-city index)/CHI Intercity trade (that showed as two legs).

Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions on this table, or any other aspect of hedging home price indices.

Thanks,  John

 

Dec/2017-recap posted

I’ve posted a brief recap of activity in the CME Case Shiller home price index contracts to the Reports section (or you can access here).

Highlights include:

–There were 3 futures contracts traded in Dec. in 3 regions across 2 expirations.  There were no options trades.

–Volume for futures and options during 2017 (182 lots) was higher than 2015 and 2016 primarily due to increased in options trades.   That said, activity has slowed dramatically over last 3 months.

–For Dec, bids and offers generally rose across most regions and expirations (except ask side of MIA).

–Bid/ask spreads were about unchanged

–Front contract (G18) bid/ask are just under 2.0 points.

–At month-end, there were bids in all 121 contracts, and  two-sided quotes in all contracts out to Nov ‘19, and then X20.

–OI on futures and options remains unchanged at 34 and 17.

–OI remains very concentrated in November expirations (74%).

–Put writers still needed!  I sense that options trading is the way to grow volume, as strong retail preference for taking one-sided risk exposures.

Please feel free to contact me (johnhdolan@homepricefutures.com) if you care to discuss any aspect of this post (or the recap) or any other aspect of hedging home price indices.

Best wishes for a healthy, happy, prosperous 2018!

John

 

Anyone want to sell 100 NYM contracts (~$5mm notional)?

I posted the headline as: 1) with the reconciliation of the tax bill, potential concerns on areas with relatively high mortgage balances and/ or relatively high state and local taxes, go from proposed to actual, and 2) to discuss how, exactly you might want to approach the issue of selling (or buying) 100 lots.  It’s the second point that I want to discuss here.

Most of the feedback I get from institutional traders about the CME market is that there’s been near no trading, and the bids and offers are only for a very small size (often 1 lot bid versus 1 lot offered) .  Few traders want to post an offering (or bid) for much larger size if a) it’s just going to sit there, and b) they have to pay attention to it throughout the day/week.  Let me borrow a concept (TaskRabbit) and suggest that you “sub-contract” your interest in buying/selling to me.  Not only am I willing to spend many more hours per week watching for changes in quotes, but as the market maker, I am more likely to get an inquiry (or know of an interest) on the other side, than many much-larger firms who don’t see a reason to dedicate resources (yet) to this effort.  I’m not looking to take orders (at least on exchange-traded products) so trades will be done until re-confirmed by you.

I’m open to taking on your “tasks” (e.g. trying to find the other side of your trade) leaving you free to focus on better uses of your time.

Send me your ideas, and I’ll try to match inquires, stir up interest, or fill in a portion of what you’re looking to do.

I mentioned NYM as the tax bill just passed, there are lots of traders who probably don’t want to be glued to the Case Shiller screens, and the notional value of 100 lots comes out to a good size of $5mm, but in concept, I’m open to any region/expiration.  I would share that between the inquiries I get, and the interest from others bidding and offering contracts, that the HCI, BOS, CHI, NYM and SFR Nov ’18 contracts are the places you’re most likely to find someone else looking to trade.

Feel free to contact me (johnhdolan@homepricefutures.com) if you care to discuss this blog, or any aspect of hedging home price indices.

Thanks,  John

 

Nov recap of activity in CME Case Shiller home price index futures

The monthly recap of activity in the CME Case Shiller home price futures contracts for November is available in the Reports section or you can access here.    This month’s report re-introduces separate pages for each region.  In addition, I’ve added YTD trading in futures and options to each regional page.

Summary observations include:

–There were only 2 futures contracts traded in Nov. – one in SFRX17 and one in DENX18.  There were 4 options trades –two each in  DENG18 and DENX18.  In addition to the smallest number of futures trades in over a year, there seemed to be sharp reduction in the number of traders posting bids and offers.

–That said, the 2017 volume of combined futures and options (169 lots) is already higher than in 2015 and 2016.

–Bids and offers generally rose across most regions and expirations (except WDC).

–Bid/ask spreads tightened marginally.

–Front contract (G18) bid/ask already just 2.3 points.

–At month-end, there were bids in all 121 contracts, and  two-sided quotes in all contracts out to Nov ‘19, and then X20.

–With Nov ’17 expiration, OI on futures dropped to 34 futures, but remains constant on options at 17.

–OI remains very concentrated in November expirations (74%).

–Note that I’ve added YTD volume in futures and options, by region, in second half of this report.

–Put writers still needed!

Please feel free to contact me (johnhdolan@homepricefutures.com) if you’d like to discuss any aspect of this recap, or anything related to hedging home price indices.

Thanks,

John