CME CSI Housing futures & options

L

luh3417

Anyone else find these house price index futures intriguing? http://www.cme.com/trading/prd/env/housingover16250.html

Supposed to come out in 2Q06; they say April. Introductory Term Sheet at http://www.cme.com/files/CmeCsiHousingIntroTermSheet.pdf

I'm a little new to futures; have an account at IB where I use the ES mini to hedge the rest of my stocks. I'd use this to hedge my house, which is in a market that seems to correlate pretty well with one of their sample areas.

Why are the trading hours Sunday- Thursday 5PM - 2PM? How can I trade that on IB when TWS seems to be down a lot during those hours.

How often will they recaculate the index?

All their indices still seem to be rising... bubble still inflating...

How do futures markets deal with an imbalance in buyers/sellers? Is there a future out there that would be a good comparable analogy to this new one?

What's the best book on futures (not so much on options or on commodities)?

What kind of margin requirements will this have? I suppose we'll find out when they bring it to market?
 
Quote from luh3417:

Anyone else find these house price index futures intriguing? http://www.cme.com/trading/prd/env/housingover16250.html
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Judging from the lack of response, nobody on this futures board has the slightest interest in these. At the end of 2004, U.S. residential real estate was worth $18.6 trillion—more than the entire stock market. And we can use these futures to hedge, not just to speculate.

If anyone can answer even one of my questions it would be great. If not, enjoy trading the other indices. Sorry to have troubled you.
 
The CME Education/Marketing Department should be able to answer most of your questions. Real estate may go up or down but I see this contract being a "zero", as in zero volume and open interest beyond the second day of trading. The big failing of the contract(s) will be the subjective nature of the calculation of the final settlement price; i.e. what is the thing really worth? Focus on the e-mini S&P instead.
 
I think that at least one of the spread betting companies in London introduced spread betting on housing a few years ago supposedly for hedging. As pointed out, the problem is valuation especially as real estate prices and trends are so dependent on the area/region. I think it wasn't very successful.

It might be worth doing a search for this to get a bit more background.
 
I do like and trade ES to hedge my stocks. I am interested in this CSI index to hedge my house. They seem to have put some effort into tying it to housing indices in 10 different markets that go back more than 10 years. They're having a launch party on March 21st; I guess it will be out in April; it will be interesting to see how it fares.
 
OK. I was in NY yesterday for the CME Housing Futures and Options kickoff/Q&A or whatever it was.

The place was totally packed. Institutional investors, investment banks, hedge funds, real estate developers, etc. were all there. Standing room only.

There will be 11 contracts:

1. Las Vegas
2. Los Angeles
3. San Diego
4. San Francisco
5. Washington, DC
6. New York
7. Chicago
8. Miami
9. Denver
10. Boston
11. A national index (I think it will be made up of the 10 markets above.. some type of average).

April 26, 2006 is the tentative launch. Margins are estimated to be between 4% and 7% of the notional contract value.

More information below:

http://www.cme.com/trading/prd/env/housingover16250.html
 
I thought this thread seemed familiar. The room was packed? Did they serve refreshments? Anyway, based upon those cities, you'd want to spread the fastest-growing markets against the slower-growing markets, i.e. (Long) Las Vegas & San Francisco versus (short) Chicago & Denver. Like I said earlier, it won't matter because nobody will want to be a "pioneer" and actually trade these things. It would also be real neat if the contract launch marked the beginning of a real estate downturn. We'll see what happens.
 
Quote from nazzdack:

I thought this thread seemed familiar. The room was packed? Did they serve refreshments? Anyway, based upon those cities, you'd want to spread the fastest-growing markets against the slower-growing markets, i.e. (Long) Las Vegas & San Francisco versus (short) Chicago & Denver. Like I said earlier, it won't matter because nobody will want to be a "pioneer" and actually trade these things. It would also be real neat if the contract launch marked the beginning of a real estate downturn. We'll see what happens.
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They did serve refreshments. It was packed. Standing room only at the Waldorf Astoria. The CME initially projects one year futures (February cycle).
 
These products definitely are intriguing. I think there are going to be lots of people/businesses looking to hedge their real estate investments. The thing I wonder about is what kind of volatility we should expect to see from day to day. I think it's going to introduce a whole new sector of people to the concept of hedging with commodity futures.
 
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