Multiyear CME Housing Futures Listings

The Chicago Mercantile Exchange (CME) lists one year of housing futures and options on ten cities. How many years should be listed?

The CME lists 4 sequential quarters on housing futures.  The spot housing futures contract for its whole spot life is in look-back in terms of pending home sales.  It has no predictive value for investors.  The remaining 3 quarters, in terms of pending home sales (when price is made), effectively then makes the available housing forwards only 8 months of term.  So, the forward housing market is 8 months.

For short hedgers, the CME housing market only gives them little in forward housing exposure.  Since housing is not a cash-and-carry commodity market, rolling housing futures shorts may only incur uneconomic financial costs.

For long housing hedgers, the rolling issue the short housing hedgers have also applies.  Further, for those housing investors looking to make tactical futures and options buys in the housing market, they are going to want the opportunity to ladder out the buys.  An example is to buy some 2 yr housing futures, some 3 yr housing futures, etc., much in the way money market notes are purchased.

Five years of CME housing futures fit most of the housing risk exposures in the market.

All opinions expressed herein are those of the author, and no statement should be as an offer to buy or sell any futures contract, or security or option or other derivative instrument. Trading of all such futures, securities, options and other derivative instruments entails significant risk which can result in substantial financial loss. Such risks should be fully understood prior to trading.

housing derivatives