The lack of volume and the wide spreads are a deterrent to *trading* these contracts, but you will always get the market price on the contract, it may not be inline with the underlying, but it will be at the market – which brings up the lack of arbitrage on such an index, which is another strike for trading these.

For those investors who are so sure of a large crash in the upcoming year, holding until settlement or expiration would allow you to get the market (index) price.

Homebuilders have already taken a beating (not to say that won’t continue), and may have significant exposure to markets outside of CA that aren’t so overvalued. Plus you have to factor the risk of buyouts if the stock gets too low, etc. Compare this to the San Diego CS Index value, which is only down a few percent down from the 2005 peak. It would appear that there is alot more downside potential there, if a crash does occur, which may justify the spread & lack of liquidity on a CME housing put.