Betting on the Housing Price Index

Bluehair

Finally someone has introduced a means to bet on the direction you reckon housing prices are going. Delta Index has just started a spread betting opportunity on a Housing Price Index.

Hopefully some of their competitors will introduce something similar to keep the spread tight. Helluva lot cheaper than actually buy/selling a property plus any profits are tax free

The imr on Dublin is 40 and 30 for national or 'outside dublin'.

It will be very interesting to see what direction it swings in the next few months as the index is a combination of the PTSB/ERSI report and the actual direction punts are going...

Sonnenblumen

Bluehair wrote:

Finally someone has introduced a means to bet on the direction you reckon housing prices are going. Delta Index has just started a spread betting opportunity on a Housing Price Index.

Hopefully some of their competitors will introduce something similar to keep the spread tight. Helluva lot cheaper than actually buy/selling a property plus any profits are tax free

The imr on Dublin is 40 and 30 for national or 'outside dublin'.

It will be very interesting to see what direction it swings in the next few months as the index is a combination of the PTSB/ERSI report and the actual direction punts are going...

Why are gambling promo posts permitted here?

Bluehair

Sonnenblumen wrote:

Why are gambling promo posts permitted here?

Oh please... hardly a gambling promo... Spread Betting is as legitimate a form of investment/hedging as anything and given the generally polarised interest in property today i thought it an interesting outlet for those with a strong opinion on the market.

Property index spreads are common in most other markets but Ireland has been slow to join them. As i pointed out i'm hoping others like perhaps worldspreads etc will join them so i'm hardly pushing delta.

If someone had genuine concerns about a fall in their real housing portfolio they could effectively hedge against that using spread betting. And since it is effectively gambling (and i'd caution anyone who doesn't understand spread betting to be very careful about researching what you're getting into) that's why i pointed out the tax free nature of it.

Sonnenblumen

At least you concede that spread betting is nothing but gambling. And IMO people who engage in such activities, irrespective of a tax-free incentive, have nothing in common with the genuine investor. Spread betters are blood sucking greed baggers.

Unlike regular investors many are more likely to have a genuine interest in the company, it's performance not just share price returns and over a longer term. In otherwords investors are important for market stability as well as company development.

Spread betters have more in common with kerb crawlers. A nasty pernicious individual who operates on the fringes of legality but fundamentally not a positive business building fibre within.

Why they are allowed tax free returns is baffling.

PDelux

Why are gambling promo posts permitted here?

This is the kind of thing i was referring to in the moderators thread. If someone like Sonnenblumen was a mod then a perfectly legitimate post like Bluehair's would not be allowed. And i have to say it pisses me off.

The forum is called "Investments & Markets". Explain why the post should not be allowed.

As Bluehair said, alot of people use financial spread betting to hedge against their existing investments. It's not for everyone but if it fits into some persons trading strategy then it is great.

BTW, DeltaIndex was awarded best Share Trading company in the Moenymate & Investor magazine awards on Friday.

According to the Tribune today, most people who have bet so far have backed a fall in house prices.

Sonnenblumen

[QUOTE=PAs Bluehair said, alot of people use financial spread betting to hedge against their existing investments. It's not for everyone but if it fits into some persons trading strategy then it is great.
Delux]This is the kind of thing i was referring to in the moderators thread. If someone like Sonnenblumen was a mod then a perfectly legitimate post like Bluehair's would not be allowed. And i have to say it pisses me off.

What are you on about, I'm not a mod so stick to the point, which Bluehair rightly concedes, spread betting is not investment but gambling. Now if that pisses you off well tough tit.


"The forum is called "Investments & Markets". Explain why the post should not be allowed.


BTW, DeltaIndex was awarded best Share Trading company in the Moenymate & Investor magazine awards on Friday.

According to the Tribune today, most people who have bet so far have backed a fall in house prices."
Woo Hoo so will there an upsurge in Kerb crawling strategists?

xebec

Can we get back on topic?

Sonnenblumen, if you want to discuss the merits or otherwise of spreadbetting how about starting a thread on it?

Now back to DeltaIndex, I don't know much about it, but it seems like an interesting financial investment. Wonder how may people will be hedging using it, especially seeing as the housing markets are supposedly on the way to decline.

damnyanks

Is it investing though? Does someone else back u the returns or is it delta index specifically?

If its delta index then I can't see anyone using it to "hedge" their positions.

Bluehair

damnyanks wrote:

Is it investing though?

Don't see why not, while i invite SB to start another thread discussing the merits or otherwise of spread betting on a larger scale (perhaps without the, quite baffling, nasty undertones though).

Personally i find it more attractive than investing in individual shares for two reasons; leveraging and tax.

Many still don't know about it though so to give you a rather extreme example i actually bought €20k of Aer Lingus shares at the launch last year which i still hold. If i sold them today they'd be worth over €29k less cgt which would be roughly €27.5k or so i believe, so say about 37% return in that time. Very chuffed with that one too i must admit and i've no intention of selling up anytime soon.

A €200 per euro(the max) spread bet would have cost me €400 to setup with a €9k margin requirement. Another €200 would have been required since to rollover the trade (half the spread cost to rollover) but closing that trade today would have netted me roughly €20k plus my €9k margin returned or well over 200% return with no cgt to pay.

Now whats important to appreciate though is if such a trade had gone the other way you can lose an equally leveraged amount though you can use stop limit orders to try and minimise any drop.

I'd spent roughly 6 months learning about this field before dipping my toes in but unlike many i'm using it for longer term trades than would be the norm.

damnyanks wrote:

Does someone else back u the returns or is it delta index specifically? If its delta index then I can't see anyone using it to "hedge" their positions.

I think Delta explain it best themselves here; Delta Index accepts client trades and actively hedges these in the financial markets. We aggregate the risks of multiple clients and hedge the net risk in the wholesale Futures and Options markets. This is how Delta Index protects itself from adverse market movements. This means we are very happy to see our customers win because we will have won slightly more in the wholesale market. By the same token when our customers lose, we lose, but slightly less than what our customers will have lost.

Other than Delta though the only other two i know of available to the Irish market are Sharewatch and Worldspreads.

It's getting quite common for big business to use spread betting to hedge against adverse currency or commodities movements and i see no reason not to use it similarly (and carefully) for smaller players like myself.

Like any investment though rule 1 is never play with more than you can afford to lose and be careful to understand the risk.

PDelux

Sonnenblumen, I'm sorry for my earlier post. I was just a bit annoyed cos i thought you were taking a cheap shot at a useful post.

soma

I have a DI account, but am I only one who's confidence in the validity/accuracy of this 'index' is a little shaken by this description from their site:

Here's how it works: we publish on our website our view of the average price of a house in each of these areas. This price is made up of the ESRI figure and our clients views of the market.

The bit about the 'views' appear worryingly not scientific. What if these 'clients' were (for the sake of arguments) estate agents with an endlessly rose-tinted view of the market regardless of the facts on the ground!?

Bluehair

I think you misunderstood, their 'clients views of the markets' are reflected by the direction the betting goes not by some Joe or Janes opinion on things. If lots of people are betting the market will go down then the index will follow it. Thats exactly what has happened btw.

soma

Bluehair wrote:

I think you misunderstood, their 'clients views of the markets' are reflected by the direction the betting goes not by some Joe or Janes opinion on things. If lots of people are betting the market will go down then the index will follow it. Thats exactly what has happened btw.

Thanks Bluehair. That's the way I had understood it inititially, the reason I had posted here was that I had started questioning my own interpretation of 'clients'.

Anyways it didn't stop me taking a bear-ish position on two of the HPI indexes for the max stake allowed. Stop losses are set at a level I'm quite comfortable with (I always set aside a few K as purely speculative money), but they're doing well for me so far.

Bluehair

soma wrote:

Anyways it didn't stop me taking a bear-ish position on two of the HPI indexes for the max stake allowed..

You and me both. To be honest i'm surprised by just how far they dropped and how quickly and i'm probably just going to take a profit given the ERSI reports during the year are likely to be less bearish than what has already actually occured on the index.

Overall though i think the index is an interesting indicator of sentiment thus far.

soma

Bluehair wrote:

i'm probably just going to take a profit given the ERSI reports during the year are likely to be less bearish than what has already actually occured on the index.

I'm planning on holding my positions for at least a few months, perhaps even until expiry in Dec '07.

The ESRI reports lag the real-world by something like 3-4 months, so for at least the next while they are likely to be reporting on periods which were rough enough for sellers.

Bluehair

soma wrote:

The ESRI reports lag the real-world by something like 3-4 months, so for at least the next while they are likely to be reporting on periods which were rough enough for sellers.

The problem is though that each index has already dropped by 12%-15%. I'm unsure as to how much weight will be given to each ESRI report versus the actual trading and although i'm very bearish on property here i doubt we'll realise that kind of drop by December (property crashes are notoriously 'sticky' on the way down).

If they maintain the index each year i'd imagine it will be well worth a punt each January.