As noted in my prior blog, the CME changed the expiration schedule for the Case Shiller futures contracts this morning. Thematically, they closed contracts with no OI, and have moved the longer expiration cycle from November (closing the Nov '21, '23 and '24 contracts) to February (opening Feb '22, '23, '24 and '25). However the new contracts won't be open until Monday Feb 11 ^1, ^2, The Nov '22 futures weren't closed as there is OI across six regions, and until the Feb contracts are opened, the Nov '22 contract will be the longest expiration. As such, I will continue to post (relatively) tight markets there, and will employ calendar and intercity spreads to add depth to that expiration. However, post Feb 12th, my plans are to shift attention -on longer-dated expirations -to the February expiration cycle
I'd like to provide contract users with two levels of comfort:
1) If they have existing positions in the Nov '22 contracts (long or short), and would like to roll them into Feb '23, I'm open to negotiating Nov '22/Feb '23 calendar spreads at tight (or even locked levels) for when the longer contracts open. The table to the right shows spread levels I'm open to discussing off-line, with those that have open interest.^3 Please contact me to discuss.
2) For users looking to take positions in intermediate expirations over the two-week transition period, I'm open to trading Nov '22 (across any region), with an understanding of possibly swapping new Nov '22 positions into Feb '23, at the calendar spreads in the table. (I'd also like to start discussions on even longer-dated calendar spreads (e.g. Feb '21 to '22/'23/'24/'25) to provide tight calendar spread markets starting Feb 12th and to jump-start discussions on clearing levels of home price risk-transfer, on an annualized basis.)
Post Feb 12th, I may not be inclined to post Nov '22/Feb '23 calendar spreads in contracts where there is no Nov '22 open interest.
While I sense that dealing with the Nov '22 contracts will be one of the bigger issues during this two-week transition, I expect that there may be others. Please feel free to contact me if you have questions related to trading these contracts over the next two weeks (and beyond), have any trading axes you'd like to discuss, or have any questions about how one might use home price index derivatives to add/reduce exposure to regional home prices.
^1 Brokers and vendors need time (starting with today's announcement) to adjust their platforms to accommodate new contracts
^2 As noted in my earlier, I will be travelling Monday Feb 11, and may not have access to a trading platform. As such, I'm planing to dive into posting quotes on the new February series, in earnest, on Tuesday Feb. 12.
^3 Note that the calendar spreads vary by region, primarily due to the combination seasonal factors and price levels. For example, the 1.3 spread (Nov higher than February) for the CHI contract reflects the large seasonal factor in Chicago home prices. At the other end, warmer spots like Miami (i.e. the MIA contract) have closer to year-round markets.