I've modified my single contract template to include more information (see below). I've color coded certain areas to describe them, or to highlight in the future. Note that I'm showing 10-city NSA index contract (i.e. HCI or CUS depending on your trading platform) but can do the same for the ten regional CME contracts.
Let me review the entire illustration for first-time readers and to serve as a resource for future posts.
The top left section has recent contract quotes to include the last, bid, ask and a mid-market value. The first three are fed from the CME (but are not live). Historically, many of those quotes have been mine. Note that I only have mids for the February expiration cycles as a) that's where I'd like to steer eyeballs, and b) the mids are the basis for YOY calculations.
The final two columns in the upper left show the bids and offers for each contract as a percent of the spot index. This allows a reader to see forward clearing levels in percentage terms and makes it easier to compare them to forward sentiment/forecasts. For example, the Feb '26 (G26) contract is quoted with bids that are 98.9% of the spot index and offers that are 101.0% of spot. Readers who believe that home prices (specifically the Case Shiller 10-city index) will be minus 5% or plus 5-10% by expiration of the Feb '26 contract (which, recall, settles on values for year-end 2025) can observe the inconsistency/opportunity.
Note that both the nominal bids and asks, as well as the "mkt % spot" are wider as expirations lengthen. For example, the bid/ask spread for the front contract (with about 1-2 months to expiration) tends to be 2-3 points (wider on regional contracts). I try to target 4-5 points on the one-year forward contract (in this case Feb '25/G25), 6-8 points on the next contract and so on.
In almost all cases the posted quotes are there to help create graphs, populate cells on this table, and to keep closes updated. Most markets will be quoted 1x1 (one lot bid v one lot offered) but I'm often open to "work inside" posted levels and for more than one lot. In effect these are my levels to prompt, but focus, debate. Other users are encouraged to post quotes inside these levels, and/or to post for more than one lot. Adding depth to Feb expiration HCI contracts (particularly Feb '24,-'27) is useful as these quotes help populate prices on regional contracts (via intercity spread quotes).
The graph in the lower left of the table shows the historical CS 10-city (in black), the bids (in blue) and offers (in red), the most recent closing prices (purple line) and the closing levels of these contracts from Dec 2022 (green squares). (Note the declining slope of the Dec 2022 closes has been rare. This downward slope existed in 2007-2009 (during the Great Financial Crises) but since 2012 forward curves have generally been upward sloping (consistent with positive HPA).
The upper right corner compares the mid-market prices against either the index for Dec 2022, and/or the mid-markets from the prior settlement. (This was done to make easier any comparisons versus the Pulsenomics quarterly surveys). For example, the mid for the Feb '25 contract is 0.27% above the mid for the Feb '24 contract (335.0 vs 334.1).
Further down, in the blue box, I'm showing the calendar spreads for Feb '24 v Feb '25 and Feb '25 v Feb '26. As I've noted in prior blogs, calendar spreads may be a useful tool for expressing HPA views on particular years. For example, the -2.0 bid means that the bidder will buy G24 two points below where they'd sell the G25 contract, while the 2.0 offer has the seller selling the G24 contract 2.0 points above the G25. The implied percentage changes are 0.60% vs -0.60%. That is, the bidder is pricing in bigger implied YOY% gains than the seller.
The box in green compares the bid side of the Feb '25 contract to the year-end index values from 2016-2022. A key takeaway here is homeowners that bought during these dates have large imbedded gains (subject to how the price of their house moved with the Case Shiller index) and may be more open to trying to lock in some of those gains with a hedge.
Finally, the lower right corner shows how much the Feb '25 (G25) contract has moved since year-end 2022. New readers might be surprised to see how much the contract moved vs the index. That is, while the index was up 7.0%, the forward contracts rose 21.8% as the Feb '25 prices were trading at a discount to spot at year-end 2022.
There's a lot of information here, so feel free to DM me with any questions, ideas for more data to add, and/or for inquiries on any trading ideas.
Thanks, John