The S&P/Case-Shiller Home Price Indices in the United States increased by 2.8% year-on-year in May. This rise was below the expected 3% growth. These numbers show the state of home prices in May and illustrate ongoing trends in the housing market. While this data is useful, it is for informational purposes only. People should do their own research before making investment decisions related to these indices. The May home price data confirms a cooling trend. The 2.8% increase was less than expected, hinting that high borrowing costs are starting to impact home values. This doesn’t indicate a market crash but rather a steady return to normal growth rates. This housing data comes amid mixed economic signals, making it hard to plan ahead. For example, the June Consumer Price Index was released recently and showed a higher-than-expected inflation rate of 3.5%. This reinforces the cautious approach of the Federal Reserve. With the 30-year fixed mortgage rate around 7.1% last week, we don’t expect any changes in policy that could boost housing demand soon. Given this situation, we are focusing on derivatives linked to homebuilder ETFs like ITB and XHB. A weaker housing market and persistent costs could pressure these companies. This makes bearish strategies, such as buying put options, appealing for protecting our investments or betting on a further slowdown. We are also looking at put debit spreads to manage our risk with these trades. The struggle between slowing growth in key areas like housing and stubborn inflation creates uncertainty in the market. This could lead to increased volatility in the coming weeks, moving away from the calm seen in the second quarter. Therefore, we are carefully adding VIX call options to protect our overall portfolio from unexpected market changes. We’ve seen similar patterns before, especially during the 2022-2023 period of tightening when aggressive rate hikes quickly cooled the previously hot housing market. Historical data indicates that rate-sensitive sectors tend to struggle until there is a clear change in central bank policy. We are using this past experience to guide our current risk assessments.

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