Property Derivatives

[newbie]

They have arrived- property derivatives

Has any one heard of one based on a residential index?

[jonpo]

Goldman Sachs I beleive do some property warrants and cfd's

halifax hpi

[CrashConnoisseur]

'Betting On House Price Movements' [October 2004]:

http://www.fool.co.uk/specials/2004/specials041001.htm

Wouldn't it be great if there was a neatly packaged tradeable security you could buy to gain exposure to UK house prices? Which you could trade in large or small size? Even better, let's have it listed on the London Stock Exchange. And while we're writing our wish list maybe it could be free of stamp duty. Oh, and geared, so that we don't have to tie up so much money.

The good news is that these securities already exist.

So why haven't you heard of them? Perhaps because they are covered warrants. This is a market segment which has grown enormously in size since its introduction in late 2002, but which has largely failed so far to capture the imagination of the media or public at large. Did you realise that there are almost a thousand covered warrants which are fully listed on the London Stock Exchange? That you can buy warrants on Tesco, on Google, on the FTSE 100 Index or the Nikkei 225 Index, on gold, oil, silver, currencies, UK house prices, and much more besides?

[Smell the Fear]

Avoid anything based on the Halifax or Nationwide indices.

They have a clear bullish bias

Surely you can turn that to your advantage? Just buy calls and you'll make a killing no matter what happens in the real world.

[newbie]

Surely you can turn that to your advantage? Just buy calls and you'll make a killing no matter what happens in the real world.

Exactly.

1. As everyone knows property prices only ever go up.

2. Therefore property derivatives will only ever go up.

3. Everyone should be piling in.

Or maybe there's a flaw somewhere in my reasoning. But the logic seems unassailable.

Edited March 15, 2006 by newbie

[Sisyphus]

The problem with these warrants is that even if you call the market right you have to pay a lot thru very high premiums (implied volatlity) and wide bid offer spreads - as to realise your profit you have to sell your warrants back to the issuer.

edit:

as to realise your profit you have to sell your warrants back to the issuer.

sorry, might not be true here - they may be listed.

Edited March 15, 2006 by Sisyphus