I see 2 ways of using the above product to my advantage:S&P/Case-Shiller Home Price Index Contract Specs
Ticker: Composite CUS, Boston "BOS", Chicago "CHI", Denver "DEN", Las Vegas "LAV", Los Angeles "LAX", Miami "MIA", New York "NYM", San Diego "SDG", San Francisco "SFR", Washington, D.C. "WDC"
Contract Size: $250 times the CSI Index (1 Chicago future would be $32,000)
Margin Requirement: $749.00 per unit
Point Price: $250.00
Contract Expiration: Quarterly, up to 18 months out
Option Contract Size: 1 future
Option Strike Prices: 5 index point intervals above and below previous day’s close in underlying futures
Settlement: Cash settled on the day the CSI Indices are released
1. If I want to protect $1,000,000 in the real estate I own at its current price, up to 18 months, I need to sell 1,000,000 of notional in futures, which is approximately 32 futures. To maintain this position, I'll need to have at least 25,000 in my brokerage account. Not too bad. The only problem with this approach, I am giving up all of the price gains of the real estate I own.
2. The alternative would be to buy out of money (about 10 points) puts in Chicago CSI futures. I did not call market makers yet, but I am pretty sure the overall price would be somewhere around 1.2 -1.5% of $1,000,000 I am trying to protect, which would is approximately $12,000.00. To make this alternative more interesting, I can finance the purchase of the options by selling /ES futures + selling /ES puts against them every month.
Any comments or ideas on this subj?