thomcooper
Newbie
- Messages
- 4
- Likes
- 0
Has anyone traded the UK house prices on IG? The Halifax Q4 2013 figure (last published figure I believe) was 173685 which IG would presumably interpret as 173.7.
I was assuming that it worked similar to their stock offerings (whereby you pay around the spot price (with a premium if you buy the long dated options), which is a close representation of purchasing the actual shares. If they go up, the price will go up, ditto if they go down...
However, the current JUN-14 spot is 183.7 - a 5% increase over the price 6 months previous (Q4 2013).
So, house prices need to rise at least 5% in 6 months before you realise a profit on a buy trade. Any less & you're going to take a hit.
There also seems to be a bias to the up side - as you can sell the contract for a higher figure than the current March figure - bagging a tidy profit if prices remain flat, never mind slump. Similarly, if house price rises rise in the first half less than 5%, you're turning a profit by selling the contract, even though the market has technically moved away from you.
I presume that IG cannot hedge against this very well & so the premium on the buy side is a look at where things are headed & providing them with a margin of safety. I guess when they have enough sell contracts, they can buy a house, but there is no clear way to hedge against buy orders (except with matched buy orders - as you can't short a 3bed semi in Croydon. I guess there can be some loose hedging by using propco stocks.
I was thinking that the contracts would be a potential way of taking advantage of a property boom without going & buying a rental property, or hedging the value of your home if you thought property prices were due to fall, but the pricing doesn't seem to add up.
What are your thoughts?
I was assuming that it worked similar to their stock offerings (whereby you pay around the spot price (with a premium if you buy the long dated options), which is a close representation of purchasing the actual shares. If they go up, the price will go up, ditto if they go down...
However, the current JUN-14 spot is 183.7 - a 5% increase over the price 6 months previous (Q4 2013).
So, house prices need to rise at least 5% in 6 months before you realise a profit on a buy trade. Any less & you're going to take a hit.
There also seems to be a bias to the up side - as you can sell the contract for a higher figure than the current March figure - bagging a tidy profit if prices remain flat, never mind slump. Similarly, if house price rises rise in the first half less than 5%, you're turning a profit by selling the contract, even though the market has technically moved away from you.
I presume that IG cannot hedge against this very well & so the premium on the buy side is a look at where things are headed & providing them with a margin of safety. I guess when they have enough sell contracts, they can buy a house, but there is no clear way to hedge against buy orders (except with matched buy orders - as you can't short a 3bed semi in Croydon. I guess there can be some loose hedging by using propco stocks.
I was thinking that the contracts would be a potential way of taking advantage of a property boom without going & buying a rental property, or hedging the value of your home if you thought property prices were due to fall, but the pricing doesn't seem to add up.
What are your thoughts?
