Eurodollar Futures Frequently Asked Questions
*The information contained within this webpage comes from sources
believed to be reliable. No guarantees are being made to the
content's accuracy or completeness.
Here is the brochure from the CME Group for Eurodollar
futures and options.
Financial futures have grown explosively since being
introduced by the CME in 1972. The single largest
source of that growth has been CME interest rate
products, particularly Eurodollar futures and
Launched on December 9, 1981, Eurodollar futures
have evolved into one of the world's most popular
contracts, and one of the most innovative. Their
flexibility and adaptability is unsurpassed. The
contracts' exceptional growth has come hand-in-hand
with nonstop enhancements. As a result, today's
Eurodollar complex bears little resemblance to that
of only several years ago.
keep you up to date on the latest contract features,
and to answer the questions users most frequently
ask about Eurodollar futures and options contracts,
we have compiled the following list.
*Contract information changes from time to time. Please
click here to see the most recent
contract specifications and
click here for the most recent trading hours.
*Were you looking for the Euro Currency? If so
click here Euro Currency.
When is the last trading day for Eurodollar Futures?
Eurodollar futures cease trading at 5:00 a.m.
Chicago Time (11:00 a.m. London Time) on the second
London bank business day immediately preceding the
third Wednesday of the contract month; final
settlement price is based on the British Bankers'
Association Interest Settlement Rate.
How is the implied forward rate calculated?
Eurodollar futures reflect market expectations of
forward 3-month rates. An implied forward rate
indicates approximately where short-term rates may
be expected to be sometime in the future.
The following formula provides a guideline for
calculating a 3-month rate, three months forward:
1 + 6mth spot rate x 182/360 = (1 + 3mth spot rate x
91/360) (1 + 3mth fwd rate x 91/360)
3-month LIBOR spot rate = 5.4400%
6-month LIBOR spot rate = 5.8763%
3-month forward rate = R
+ .058763 x 182/360 = (1 +.0544 x 91/360) (1 + R x
91/360) 1.029708 = (1.013751) (1 + R x 91/360)
1.015740 = (1 + R x 91/360) 0.062270 or 6.227% = R =
the implied forward rate
What is the difference between "add-on interest" and
This concept describes the difference in the yields
quoted for T-bill and Eurodollar contracts. T-bills
are sold at a discount to face value and redeemed at
par. The difference between par value and the
T-bill's price is the interest paid. Interest on ED
deposits is "added on" to the principal loan amount.
example of add-on interest with Eurodollars: You borrow $1 million for three months at 5.50%. The 5.50% of interest
is "added on" to the $1 million principal amount.
The interest due (assuming a 91-day loan) is equal
to $1 million x .055 x 91/360 = $13,903.
example of discount yield with T-bills:
You sell $1 million face value of 91-day T-bills at
an annual discount yield of 5.50%.
Discount = $1 million x 0.055 x 91/360 = $13,903
T-bill Price = $1 million -$13,903 = $986,097
Money Market Yield = $13,903/$986,097 x 360/91 =
5.578% (comparable to ED "add-on" rate)
Where does the Eurodollar Futures $25 tick come from?
The Eurodollar tick reflects the dollar value of a
1/100 of one percent change in a $1 million, 90-day
deposit. It is determined by this equation:
$1,000,000 notional x .0001 x 90/360 = $25
How are price assignments determined for packs and
The price of a bundle or pack is quoted in terms of
the average net change from the previous day's
settlement prices for the entire group of contracts
in the pack or bundle.
Bundles and packs are quoted in minimum .25 tick
increments; however, whole-basis-point prices are
assigned to the individual legs of the trade. Prices
are assigned to reflect fractional combination
prices beginning with the most deferred contracts,
and working forward.
If the 2-year bundle trades at + 2.25, the first six
contracts are priced at a net change of +2, and
the last two contracts at +3.
If the 10-year bundle trades at - 5.75, the first ten
contracts are priced at a net change of -5, and
the last 30 contracts at -6.
If the Purple Pack trades at +.5, the first two
contracts are priced at steady (unchanged), and
the second two contracts are priced at +1.
How is the "lead" month in Eurodollars Futures determined?
The "lead" month is considered to be the contract
with the highest daily volume, currently based on a
12-day moving average, calculated on every business
day, beginning five weeks after the previous
When are new contracts listed?
Following the expiration of a quarterly Eurodollar
futures contract, a fortieth quarterly contract is
available to trade the following business day. Since
the vast majority of Eurodollar futures contracts
expire on a Monday, the new contract is generally
available on the Tuesday following a Monday
The lag between expiration of the near month future
and the listing of the fortieth Eurodollar contract
results in a one-day delay in listing a new "Copper"
(Year 10) pack after the expiration of the front
how much does an option have to be in-the-money for
automatic exercise to take place at expiration?
Automatic expiration takes place only at expiration
and not before. To be automatically exercised at
expiration, an option needs only to be in-the-money
by the smallest price increment possible (e.g., a
expiration, all in-the-money Eurodollar options are
exercised automatically, in the absence of contrary
instructions delivered to the Clearing House.
you're short an in-the-money option, when will you
know you have been assigned? When will you be
assigned a futures position?
You will be informed before the markets open on the
following business day that you have been assigned,
and you'll be assigned a futures position as of the
day the assignment was made. Assignments are made
through a process of random selection of clearing
firms with open short positions in the specific
What is the dollar value of "cabinet" in the
Cabinet in Eurodollar options is the minimum premium
value of $6.25 or "1/4 tick."
What are the rules regarding the listing of 12.5
point strike prices?
Quarterly and Serial options: On the expiration day
of options in the March quarterly cycle, strike
prices in 12.5-point increments will be listed on
the two serial, and next March quarterly option
on Monday, September 13, 1999 (expiration day for
Sep 99 futures and options), 12.5-point strike
prices would be listed on October and November
serial options, and December quarterly options.
One-year Mid-Curve options ("shorts"): the first
quarterly and two serial expirations are eligible to
trade in 12.5-point strike price increments at any
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