One reason that volume in the CME contracts may have been so low, is that users are universally bullish, don't want to lift offers that have moved up 10-15 points in the last few weeks, or see no reason to hedge. If so, let's flip things around and explore that bullishness with some offers on calls.
The table below (with Calls bordered in green) has indicative levels for calls for the Feb '22 expiration, for 19 of the regional contracts. (I've left out Detroit as updates to spot have been sporadic.)
I've set most strikes at slight premiums to spot, and for the ten regions that have CME futures, these are close to the Feb '22 contract prices. In most of the CS-10 index cities, CME Feb '22 (G22) futures trade at only a slight premium to spot. However in the "other ten" components of the CS 20-city index, my sense of forward prices in some regions (e.g. Charlotte, Phoenix and Seattle), would be much higher than spot. As such, I've raised strike levels there to keep Call premiums from being too high.
Again, I'm focusing on one expiration -the 2021 year-end index results that will be posted in Feb '22 -to concentrate interest. As before, I'm open to all kinds of option strategies (bull/bear-spreads, buying/selling vol) but, to start, just using the Feb '22 expiration.
Note that the Calls have the same feature as the Puts, in that payouts are capped beyond some price (in this case the "Ceiling").
I'll try to update Call prices periodically, and will post quotes to the Options page.
A key issue to note is that these are options on a repeat-sales index. Gains in median-priced homes have been all the rage showing in some cases, double-digit percentage gains, yet those may be influenced by a change in the mix of houses that sell, and therefore might move differently that a repeat-sales index of the same region.
Finally, while I've shown Calls on 19 regions, I'm open to writing HPHF Agreements referencing other cities that have other public indices (e.g. Freddie Mac).
Feel free to contact me if you have any question about this blog, have an options idea in mind, or if you'd like more information on the concept of using home price index derivatives to hedge home price risk.
Thanks, John