The run-up to the the May ’12 contract expiration has seen increased trading in selected front-month contracts. Bid/Ask spreads have narrowed to less than one point on average (with May CUS pretty consistently quoted at the minimum 0.2 increment) and bid/ask quotes have been for more than 1×1. (CUS was 5×10 earlier in the week and SFRK12 is 6×8 this morning).
Pricing for the May 2012 contracts straddle “unchanged” from last month. CHI is the notable under-performer with a mid-price about 1% below last month’s index, while SDG and MIA (the only two CUS-10 index values that were up last month) have mid-points that are up about 80 bps.
The CUSK12 (May) contract has inched up to unchanged with today’s 146.8/ 147.0 market bracketing last month’s 146.9 index, so there’s some possibility that the headlines for Tuesday May 29th reference an uptick in the (a) CUS index.
CUSK12 has been the most actively traded contract, contributing to the ~67 contracts traded this month (across all contracts). Open interest for CUSK12 is 17 contracts while overall May ’12 OI is 24.
While the month/month differences are modest, the year/year (index to mid-point) changes highlight how correlations across regions are breaking down. LAV looks to post about -7% for the last 12 months, while BOS and WDC should be down only slightly, and DEN could be up.
Contract pricing fro Aug12 and Nov12 is consistent with seasonality patterns that suggest a 1-2% rise in contract values for the August expiration (the June index) and another 1-1.5% increase by the November expiration (the Sept index). Much of the recent trading volume has come from calendar spreads trades debating differences in projected increases across indices.
Finally, I’ve been posting (from time to time) call option prices on May CUS 140 calls at levels that are inside the 0.2 bid/ask futures spread. (Recall that options can be quoted on a 0.1 increment). If you have an axe on the CUSK12 contract please contact me (johnhdolan@homepricefutures.com) and I’ll re-post May option quotes.