Anyone has experience with the housing index futures?

General discussions about futures.
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TrendsCatcher
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Anyone has experience with the housing index futures?

Post by TrendsCatcher » Wed Apr 23, 2008 5:09 pm

Has anyone traded the housing index futures, liquidity seems to be terrible, but housing market is in a smooth downtrend. Anyone would like to share your experince and thoughts?

zacharyoxman
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Post by zacharyoxman » Thu Apr 24, 2008 8:52 am

Ive traded them from time to time for clients.

The only markets that seem to have any reasonable trades (from my memory) are LA, LAV, Miami, NY and Chicago. I think that San Diego and a couple of other regional markets were much thinner. You can trade with limit orders and I've had clients carry positions for months at a time. Even at that point, the open interest was less than 1,000 contracts and the daily volume rarely crack 20.

As with any thin market, you must watch the spreads and calculate a large cost for rolling, especially if you are playing a LT trend in the market.

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Post by TrendsCatcher » Mon Apr 28, 2008 11:05 am

zacharyoxman, Thanks for the reply.

Yeah, the volume is so low, almost non-existent, I think I'll avoid them at this moment. I hope that the housing index futures as a class will survive. I think they could create unique opportunities for the speculators.

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Post by zacharyoxman » Mon Apr 28, 2008 3:06 pm

They came out with a lot of fire, much like the Ethanol futures, but have not had a serious catch with speculators nor hedgers to this point.

I do see a ton of potential going forward, and I'd love to trend follow them as housing seems like a trend friendly market.

Perhaps they'll dump more marketing dollars behind it once the housing slump clears up?

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Post by TrendsCatcher » Mon Apr 28, 2008 4:43 pm

The fact that a lot of zero-experience people made money speculating in the housing market tells us the housing trend should be super smooth once a trend is established. So, theoretically the futures in this sector should have very smooth trend. But who knows, because the index is not totally correlated the spot market, right?

But, if these sectors survive, they will open a myriad of opportunities, imagine that you don't have to travel to other cities to "invest" in their booming housing market, also imagine that you buy a house cheap, then live in it for years, then when the market gets into the mania stage, you selll short the housing futures in your area, and still live in the house, and cover your short when the housing market calms down again! There will be tons of possibilities! But the prerequsite is to have good liquidity, otherwise all possibilites are just a dream.

The CME needs to market them as they did with the FX futures.

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Post by zacharyoxman » Mon Apr 28, 2008 10:36 pm

Agreed 100%. There seem to be a ton of products and synthetics that could be created around the idea of housing futures. I have a workspace that I actually open every few weeks to track the prices and volumes in the housing futures.

I am going to keep a close eye on these as I think they will be nice trenders in the future as the liquidity deepens.

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