CME CSI® Housing Futures & Options
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Previously Featured Markets |
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Download the whitepaper:
Introduction to CME CSI® Housing Futures and Options CME CSI Housing futures & options are designed to provide a facile way for institutional and individual investors a way to gain exposure to real estate risk and effectively diversify their portfolios. Commercial and private asset holders are afforded an efficient hedging mechanism. In the process, this novel market may have the effect of reducing transaction costs for trading real estate. CME is currently planning for a launch in the 2nd quarter of 2006. Economists Karl Case and Robert Shiller have developed a method of tracking home prices and have devised indicies (Case-Shiller Indexes) to chart the rise or fall in home values in 10 markets, Boston, Chicago, Los Angeles, Las Vegas, Miami, Denver, New York, San Francisco, Washington DC, and San Diego. These tradable futures will be pitched to real estate owners, builders, mortgage lenders, and hedge funds. A builder putting up a $100 million subdivision outside Chicago ready for sale in 2008 could sell the Chicago housing index and if the housing market plummeted before the developer was able to sell the units of the subdivision, the developer would recoup a chunk of the loss with the profits on the short housing futures position. Similarly, a soon-to-be homeowner who wants to protect against a higher home prices between now and when a purchase is planned to be made, could simply buy a housing futures contract to lock in the purchase price. Any appreciation in prices will be offest by an increase of value in the futures contract. The possible uses for housing futures are virtually infinite and provide opportunities for price and risk management in an asset class that directly affects a greater portion of the population than any other. - Developers looking to hedge against possible depreciation of their properties before completion of a project.
- A future home buyer looking to hedge against any possible housing appreciation between the current date and the time they intend on purchasing a home
- A speculator looking for a way to profit from falling housing prices
- A speculator looking to profit on rising housing prices without having to purchase real estate.
Housing Futures Specifications | | Futures | Options on Futures | | Contract Size | $250 x Index, e.g., Los Angeles CSI @ 207.82 in Q1 2005, contract value = $51,955 | One Futures contract | | Tick Size | 0.10 index points ($25.00) | 0.05 index points ($12.50) | | Trading Hours | Offered on CME Globex® Sundays-Thursdays 5:00 pm-2:00 pm the next day | Offered on CME Globex® Sundays-Thursdays 5:00 pm-2:00 pm the next day | | Months | March, June, September & December | March, June, September & December | | Final Settle Day | One business day after 25th of contract month | One business day after 25th of contract month | | Cash Settlement | Cash settled on Case-Shiller Indexes® (CSIs) of housing prices published by Fiserv CSW Inc. (CSW) for Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York Commuter Area, San Diego, San Francisco, Washington DC and 10-city composite index | Exercised into the associated futures contract | | Strike Prices | NA | 5 point intervals above and below market price | | Position Limits | 5,000 contracts | 5,000 contracts |
Subject Indexes – CME will list futures and options based on indexes depicting matched sale prices for single family residential dwellings in ten (10) metropolitan statistical areas ("MSAs"). The 10 MSAs include Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York Commuter area, San Diego, San Francisco and Washington D.C. In addition, the Exchange will further list futures and options based upon a composite index of the ten MSAs. MSA | Represented Counties | Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area | Essex MA, Middlesex MA, Norfolk MA, Plymouth MA, Suffolk MA, Rockingham NH, Strafford NH | Chicago-Naperville-Joliet, IL Metropolitan Division | Cook IL, DeKalb IL, Dupage IL, Grundy IL, Kane IL, Kendal IL, McHenry IL, Will IL | Denver-Aurora, CO Metropolitan Statistical Area | Adams CO, Arapahoe CO, Clear Creek CO, Denver CO, Douglas CO, Elbert CO, Gilpin CO, Jefferson CO, Park CO, Broomfield CO | Las Vegas-Paradise, NV Metropolitan Statistical Area | Clark NV | Los Angeles-Long Beach-Glendale, CA Metropolitan Division | Los Angeles CA | Miami-Miami Beach-Kendall, FL Metropolitan Division | Miami-Dade FL | NY Commuter Metro Area | New Haven CT, Bergen NJ, Essex NJ, Hudson NJ, Hunterdon NJ, Mercer NJ, Monmouth NJ, Morris NJ, Ocean NJ, Passaic NJ, Sussex NJ, Union NJ, Warren NJ, Bronx NY, Dutchess NY, Kings NY, Nassau NY, New York NY, Orange NY, Putnam NY, Queens NY, Rockland NY, Suffolk NY, Westchester NY, Pike PA, Fairfield CT, Middlesex NJ, Somerset NJ, Richmond NY | San Diego-Carlsbad-San Marcos, CA Metropolitan Statistical Area | San Diego CA | San Francisco-San Mateo-Redwood City, CA Metropolitan Division | Marin CA, San Francisco CA, San Mateo CA | Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area | District of Columbia DC, Calvert MD, Charles MD, Frederick MD, Montgomery MD, Prince Georges MD, Arlington VA, Clarke VA, Fairfax VA, Fauquier VA, Loudoun VA, Prince William VA, Spotsylvania VA, Stafford VA, Warren VA, Alexandria City VA, Fairfax City VA, Fall Church City VA, Fredericksburg City VA, Manassas City VA, Manassas Park City VA, Jefferson WV |
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