Oct recap of activity in CME Case Shiller futures – busiest month in the last year.

I’ve posted a recap of activity in the CME Case Shiller home price index contracts for October.  The recap is in the Reports tab or you can access here.

Highlights of recap include:

–There were 22 futures contracts traded in October, across 6 expirations, and 3 regions.  Trading, and third-party quotes, in SFR contracts (where 12 lots traded) dominated activity.  There have been only 3 months since Nov 2013 with higher volume.  Beyond that, activity was scattered across the month and often throughout trading days (particularly when the equity markets were volatile).

–The LAV, SDG and SFR contracts had the most regional activity, with LAV (and WDC) breaking away from other contracts is not falling much.  Forward HPAs across regions have started to diverge from the 10-city index (some priced for better HPA / some for worse), consistent with either different outlooks across regional markets, or given limited trading, pressure on regions where traders are looking to hedge.

–There were no options trades (but many inquiries.)

–Bids and offers collapsed across most regions in the largest sell-off in CS contracts since the Financial Crises.  The LAXX22 contract saw the biggest decline of ~12 points.  LAV and WDC were relatively unchanged.

–Forward curves flattened with some calendar spreads in longer-dated expirations bid at negative spreads (i.e. sell front contract/buy back one for a lower price).

–Increased volatility, combined with flattening of forward curves, led to much higher put option quotes.  (My standard page of one-year puts is not included in this recap, but will be the topic of a blog early next week)

–Despite volatility, bid/ask spreads only widened a small amount (as more traders weighed in, often throughout trading days).  Such widening was concentrated in X20 and longer contracts.

–OI on futures increased from 47 to 49, consistent with some positions being closed out, or intra-month trading.

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


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