open interest – HomePriceFutures.com

September Recap of CME Case Shiller futures

I’ve posted a recap of (the very limited) activity in the CME Case Shiller home price index futures for September. You can find the recap in the Reports section, or access here.

(I’ve also updated life-to-date volume and open interest tables. Both are in the Reports section.)

There was very limited trading in September (partially as I was traveling for two weeks) but prices moved lower -particularly in longer-dated expirations – across all regions (except LAV). For now, as I note below in the highlights, interest from third parties is concentrated in: front contracts, SFR region, and puts. As such, I’m going to start this month to shift my focus from posting continual two-sided prices on all (121) contracts to more concentrated focus on those three areas. I’ll still try to recap all prices in month-end reports. Of course, anyone can continue to post prices in any contract but best to contact me if you’d like a response to your inquiry.

Month-end highlights include:

–There were 2 futures contracts traded in September –both in SFRX18.

–There were no options trades (but multiple inquiries focused on 9-18 month, slightly out-of-the money strikes.)

–Despite low volume, there is interest from third-parties, primarily in front contracts, across the SFR expirations, and puts.

–Bids and offers were lower across all regions (except LAV and MIA). Prices for LAX and WDC were down the most.

–Bids and offers were lower across expirations with biggest declines in contracts beyond Nov 2020.

–OI on futures fell from 48 to 47.

–OI has become even more concentrated in Nov expiration cycle with all but 2 of 48 OI in Nov contracts.

-Paris contracts have not begun to trade. Index representatives will be in the NYC area in mid-November should anyone want to hear more.

Feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions on this blog, or any aspect of hedging home price index exposures.

Thanks, John

June recap posted

I’ve posted the June recap report, as well as updating graphs for month-end prices, price changes between May and June, and tables showing volume and open interest over the last five years. All reports, graphs and tables are in the REPORTS section of this website.

As to the recap, there were only two trades, so not much to say there.

On balance it was a quite month with limited quote updates (with the exception of traders in CHI and SDG).

One bright spot is that bid/ask spreads converged back to levels from a few months ago. Spreads are tighter in all 11 regions and in 10 of 11 expirations. Much of that tightening took place in the Q15, Q16 and X17 contracts. The Q15 front contract is now at bid/ask spread levels seen when other contracts had two months to expiration.

The CUSX16, and now X17, contracts are carrying their weight as benchmarks. I’ve used the 2-point bid/ask spread in the CUSX17 contract as a leg in intercity spread quotes – which is part of the reason that X17 bid/ask spreads have come in so much.

The other ray of hope is that the number of inquiries for information on the contracts continues to climb.

Please feel free to contact me at johnhdolan@homepricefutures.com if you have any questions. (I’ve switched servers so hopefully fewer tech issues going forward.)

John

March recap posted

I posted a recap of activity in the CME S&P Case Shiller home price futures for the month of March in the Reports section. In addition there is a set of graphs for 11 contracts, and prices and price changes for the month. You can access them here (Recap, Graph, Prices). (Note: while my intent was to capture March 31 prices I had technology challenge, so comparisons are primarily between Feb 27 and April 1).

The key observations for the month include:

12 trades across 5 regions and 3 expirations (all 2015 contracts)
Higher bids across all 10 of 11 regions (aggregated across all expirations) WDC the exception
Tighter bid/ask spreads across 9 of 11 expirations (with biggest improvement in K15, Q15, and K16 contracts)
Increase in OI from 57 to 64
Several calendar spread traders (mostly K15 v Q15)
More Intercity Spread quotes (but no trades)
A sense of greater involvement by other traders (particularly in 3 West Coast contracts -LAX, SDG, and SFR)
YTD volume still lowest since 2010
Another month of CUSX16 quoted at < 1.0 bid/ask spread

Please feel free to contact me (johnhdolan@homepricefutures.com) if you have any questions about the recap, or any aspect of hedging home prices.

Recap of Nov activity posted

I’ve posted a recap of activity in the CME S&P Case Shiller home price index futures for the month of Nov to the Reports section of this website (or one can click here to access.) The report uses an end date of Monday Dec. 2 as the last business day of November (Friday Nov 29) was in the midst of a holiday weekend.

In addition I’ve updated month-end graphs, prices, price-changes on the month, and long-term volume and open interest tables (that can all be found in the Reports section).

The “headlines” for the monthly recap include:

Narrowing of bid/ask spreads during the month, followed by dramatic widening post CS #’s
Volume of 23 contracts
Open interest dropping from 149 to 81 with the expiration of the Nov ’13 contract (I’ve included a table showing how this is an annual phenomenon
Introduction of Nov 2018 contract
Tables on volume, open interest, price changes, bid/ask spreads, calendar spreads
Graphs for each of 11 contract (both linear graphs and bar graphs)

I may take some pages of the report and focus on them in separate blogs but for now I just wanted to post the report.

If you have any questions, please feel free to contact me: johnhdolan@homepricefutures.com

Basics: Historical Volume, Open Interest 2006-2013

In working to update the marketing book, I compiled historical open interest and volume data from the CME covering the period 2006-2013 into two tables in the Reports section (or that one can access here volume, open interest) and shown here.

The volume table shows that 10 times more volume occurred when the contracts were first launched in 2006. In terms of any good news/bad news/ takeaway from the volume figures, the numbers show that there was a time when there was a lot more trading, that we are doing a small fraction of that amount today, but that, given the history, it’s not unrealistic to hope that such volume numbers might be achieved again at some point down the road.

Open interest ran down fairly quickly after 2007. One possible reason was that the CME originally only rolled out contracts with expirations of a maximum of one year. Today’s longer contracts allow for more “stickiness” to open interest. Unfortunately, most trading (and open interest) has been in shorter dated contracts so replenishing expiring OI has been an ongoing issue.

I continue to receive inquiries about contracts, and traffic on this site has picked up. While all real estate indices have their quirks, I believe that this is the best “pure play” platform for expressing a broad view on 2-4 year forward real estate index values. I remain hopeful that we are one trade away from two parties being introduced for a 100-lot (or bigger) brokered trade. I’m happy to facilitate orders to that end. I’ve heard from both hedgers and foreign bulls but, to date, have not quite been able to match them up. I would suggest that any large potential buyers/sellers focus on the CUS, LAX and NYM contracts as that is where the most consistent interest has been.

Please feel free to share any potential interest with me at johnhdolan@homepricefutures.com and I will endeavor to bring the two parties to common price.

Two weeks to go -Aug ’13 contract tightens up

I mentioned in yesterday’s blog (on calendar spreads) that the bid/ask spreads in the Aug ’13 outright markets had narrowed. That seemed to challenge/prompt other traders yesterday to bring spreads in further. (Thanks! Always appreciated!) Those actions resulted in 35 changes (all upticks) to closing prices. (I view keeping closes “current” as valuable for others looking at these contracts down the road.) This morning, the bid/ask spreads are tighter than recent expirations and have reached levels that are typically not seen until days before expiration.

There are several points to highlight in the table (below) related to the Aug ’13 Q13) markets.

First, the bid/ask spreads (on the last line) range from 0.8 to 1.6 points. (As in past tables the two “best” markets are highlighted in green, while the “worst” are highlighted in red). The overall average is 1.20 points – a level I don’t recall seeing since Spring 2012.

Second, the headlines for Tues Aug 27th (when the Case Shiller indices are released) will remain the same as in past months in that LAV and SFR will continue to show strong year-on-year gains of ~24%. As before NYM will bring up the rear.

Third, Q13 markets suggest that month-on-month gains will be strong across the board (ranging from 2.0 to 2.6% in ten contracts) with the outlier exception of CHI which is priced (at mid-market) for a MOM gain of 4.5% (surpassing last month’s 3.7% gain). Traders have seen big price pops in cities targeted by “rent-to-buy” programs. Is it CHI’s turn, or just the result of thin markets?

Finally (not shown) there is open interest in 8 of the 11 Q13 contracts suggesting that some traders have both a vested interest in the markets and the opportunity to unwind before expiration.

Tight outright spreads are usually one pre-condition for more active trading. I hope to post a blog (and quotes) later in the week focusing on inter-city spread quotes for the Aug ’13 contract that should allow even more angles to take a view on Aug ’13 prices. (BTW- per the above comment, I’d be open to selling CHIQ13 against other contracts if someone has strong views on the CHI market).

As always, please feel free to contact me (johnhdolan@homepricefutures.com) if you care to discuss this blog or any other aspect of home price derivatives.

Feb 2013 Contract ~ one week to go

The Feb 2013 (G13) contract will settle on Feb 26th when the Case Shiller indices for December are released. While there is limited open interest (22 contracts w/ 11 in LAV) this is an important contract to watch in the run-up to the close. Many economists and Wall Street analysts make year-to-year forecasts on projected home prices, and the settlement on the Feb. contract (the December index values) will let the world see how those 2011 to 2012 forecasts fared.

The chart and table to the right show the markets for the Feb 2013 CME Case Shiller (home price index) futures contracts in two ways.

In the bar chart, bid, mid, and ask levels are shown as a percent of the current Case Shiller spot index. (There’s a clearer version -a .bmp file – in the Reports section.)

Bid-ask spreads on the Feb ’13 contracts range from 1.4 to 2.8 points. While individual spreads have been tighter during past expirations, there have been few recent trades, and limited quotes, so spreads seem a tad wider than normal.

The mid-points (as well as bids) of the 3 California contracts all are higher than last month’s Case Shiller index, while the mid-market values for the 3 Northeast regions are all lower.

The table shows some historical values for the regional Case Shiller indices (Note: some systems describe the 10-city index as CUS, some as HCI). The mid-market lelels for the Feb ’13 contract (again, the Dec. 2012 Case Shiller index value) are consistent with double-digit percentage gains in certain regions that have received a lot of press (e.g. MIA, LAV, SFR), while some quotes from other regions (e.g. CHI, NYM) are consistent with index levels being unchanged from 2011 to 2012.

Averaging the two extremes (on a weighted basis) the mid-market of the 10-city index looks to be up about 6% for the year.

While my primary interest in touting the contracts is to facilitate forward trading (and a blog on calendar spreads for Feb ’13/Feb ’14 will soon follow), there are some who like to focus on front-contract trading. The data to settle the Feb contract covers the period Oct -Dec. If there are those who would like to “get something going” in the Feb ’13 contracts (particulary in inter-city spreads) before they expire, please post levels, or feel free to contact me (johnhdolan@homepricefutures.com) to discuss ideas.