Recap of CME Case Shiller futures activity during March

I've posted a recap of activity for March in the CME S&P Case Shiller futures contracts. It can be accessed in the Resources section or one can click here.

Highlights from the recap include:

–I believe that there were 67 contract lots traded during the month.^1  There trades took place across 6 expirations, and over 9 regions.   The combined features of spikes in market volatility, the second month of the transition to a focus on February expirations, as well as surging margin calls by the largest broker offering access to trading of Case Shiller futures, all combined to induce users to unwind, trade, or swap exposures by expiration, possibly while moving positions to other brokers. ^2 If 67 lots is correct, that would be the fourth-highest monthly volume since 2008 (with the other top 3 all occurring by 2013).

-Indicative of the unwind activity, open interest dropped during the month from 49 to 41 (on March 30th). That would make OI the third lowest March tally over the contract's 14-year history

-I worry that the combination of high initial margins and low OI may limit enthusiasm for new users opening positions. I'm aware of two other brokers (Insignia Futures and Schwab) that offer to host activity in CME Case Shiller futures, but more are needed.

–As the stock market collapsed, prices on CS futures dropped, forward curves inverted (if quoted at all), and bid/ask spreads widened. While there was modest curve inversion in some contracts during the winter of 2018-19 after California home sales fell, that inversion was short term. Absent that episode the last time curves remained inverted for an extended period was before 2012.

–I’ve asked users to focus on four expirations: May ‘20, Nov ’20, Feb ‘21 and Feb ‘23 for the time being to concentrate inquiries and rebuild market depth. Price discovery in key anchor contracts (Feb ‘21 and Feb ’23) will be crucial to allow users to better express relative value sentiment in other contracts via calendar and intercity spreads.

-I reminded users that my thoughts on clearing levels for the G21 contracts, as well as trading axes that users contribute, are posted on a new web page:

Please feel free to contact me regarding this blog, the monthly recap, if you have trading ideas, or any aspect of using home price index derivatives in hedging strategies.

Thanks, John

^1 The CME posts monthly totals, that should be available by tomorrow. The tally is my estimate, having followed all trading.

^2 I also confess to some "fat finger" paired error trades, while learning details of a new platform.