I've posted a recap of activity in the CME Case Shiller home price futures to the Resources page, or you can link here. Let me review the key metrics before reminding readers of the changes.
The monthly highlights include (with some added color here):
–16 futures contracts traded during Jan 2020, across 5 expirations, and 4 regions. The rolling 12-month tally of trades climbed to 161 -higher than any yearly total since 2014 (166).
–Prices were generally flat across most regions., w bid/ask marginally tighter. It seems that front contracts continue to inch higher (on lower mortgage rates, convergence?) while longer-dated contracts clear at levels below expectations. Price volatility was a fraction (<10%) of stocks. Third-party interest seemed focused on HCi (10-city contract), DEN, and SFR.
–Open interest remains concentrated in 3 expirations (G20, X20 & X22).
–Three regions have no OI (DEN, MIA, and SDG). (I'd be open to any inquiries on these regions, as I'd like to boost volume.
I continue to receive inquiries -both futures/forward and options for other regions (which I'm trying to address via Home Price Hedging Fund. I've had recent discussions about: Austin, Tampa, Salt Lake, as well as Vancouver and Toronto.
The big news of the month was the CME announcement on Jan 27 that they were: 1) reducing the number of expirations, 2) shifting the focus on longer-term expirations to February, and 3) de-listing options. I've blogged on the first two: CME Announcement on changes to expirations for Case Shiller futures, and Trading Nov '22 during two week transition to new expirations over the last few days. I hope to roll out a back-up plan to options trading in the next month.
I'd ideally like to transition holders of Nov '22 exposure into a February expiration, as I hope that Feb '21, '23, and '25 will become benchmark contracts.
Feel free to contact me if you have any questions related to this blog, the CME announcement, how I plan to approach market making during the transition and after, or if you have any questions related to hedging (adding or reducing exposure) to home price indices.
Thanks, John