|
Eurodollar Futures and Options Education
Eurodollar futures and options quick facts:
Euro dollars are U.S. dollars on deposit
in commercial banks located outside of the United States.
Euro dollars deposits play a major role in the international
capital market, and they have long served as a benchmark
interest rate for corporate funding.
Were
you looking for information about the Euro Currency? The
currency used by the European Union.
The
Euro dollar futures
CME contract reflects the London Interbank Offered Rate
(LIBOR) for a three-month, $1 million offshore deposit. Euro
dollar deposits are direct obligations of the commercial
banks accepting the deposits and are not guaranteed by any
government. Although they represent low-risk investments,
Euro dollar deposits are not risk-free. Changing interest
rates can hurt euro dollar investments.
CME
developed and launched Euro
dollar futures in 1981, and
since then Eurodollar futures has evolved into one of the
world’s most innovative and popular contracts—and is now the
most actively traded futures contract in the world with open
interest recently surpassed the forty million mark and an
average daily volume of over 3 million Eurodollar futures
contracts.
Euro dollar future volume on the GLOBEX
electronic platform accounts for over 85% of the Eurodollar
futures volume.
CME Euro dollar futures are
cash-settled, therefore, there is no delivery of a cash
instrument upon expiration because cash Euro dollar time
deposits are not transferable.
Eurodollar
futures contract size has a
principal value of $1,000,000 with a three-month maturity.
Eurodollar futures move in 1 point increments, or .01,
equaling $25. The Eurodollar tick reflect the dollar value
of a 1/100 of one percent change in a $1 million, 90-day
deposit, determined by the following equation:
$1,000,000 notional value x .0001 x
90/360 = $25.
Trading can also occur in minimum ticks
of .0025, or ¼ ticks, representing $6.25 per contract and in
.005, or ½ ticks, representing $12.50 per contract.
Eurodollar contracts trade Mar, Jun, Sep, Dec; Forty months
in the March quarterly cycle, and the four nearest serial
contract months
Since the Eurodollar futures contract’s
inception, it has become one of the most versatile
investment vehicles offered on the listed markets. As a
result, today’s Eurodollar future contract offers even more
trading opportunities.
Besides Eurodollar futures
and options on futures, CME also developed the following as
part of the Eurodollar contract:
Eurodollar Bundles—allow traders to simultaneously buy or
sell a consecutive series of
Eurodollar futures in equal
proportions beginning with the front quarterly contract.
Eurodollar Packs—simultaneous purchase or sale of an equally
weighted, consecutive series of four
Eurodollar futures,
quoted on an average net change basis from the previous
day’s close.
Serial Eurodollars—identical to quarterly
Eurodollar futures
with the exception of expirations dates. Serial Eurodollars
expire in months other than those in the March, June,
September and December quarterly cycles.
Eurodollar Future Contract
Specifications
Eurodollar Futures
Contract
Size -
$1,000,000
Quotations
-
Index points
Minimum
Price Fluctuation (Tick) -
.0025 =
$6.25/contract for spot-month contract; .005 =
$12.50/contract for all other contracts
Contract
Months -
Mar, Jun,
Sep, Dec and 4 serial months
Regular
Trading Hours (Central Time) -
7:20 a.m.
- 2:00 p.m.
GLOBEX
Trading Hours (Central Time) -
4:30 p.m.
- 4:00 p.m. the following day; on Sunday, trading begins at
5:30 p.m.
Last
Trading Day -
11:00 a.m.
London time on the second London bank business day
immediately preceding the third Wednesday of the contract
month
Final
Settlement -
Based on
the British Bankers' Association Interest Settlement Rate
Trading Symbol
ED
Eurodollar Options on
Futures
Underlying
Contract -
One
Eurodollar futures contract
Strike
Prices -
25-basis-point intervals (i.e., 93.00, 93.25, 93.50, etc.)
12.5-tick strike prices are listed on the 2 serial months
and next quarterly expiration month on the day following the
expiration day of options in the March quarterly cycle.
12.5-tick strikes are listed in one-year Mid-Curve options
on the 2 serial and first quarterly expirations, and in the
2-year Mid-Curve option in the first quarterly expiration.
Under certain circumstances, CME interest rate option
combinations may trade at one-half tick increments (.005 =
$12.50). Contact your broker or CME.
Premium
Quotations -
Total IMM
Index points (i.e., 0.34 quoted as "34 Index points" or "34
basis points")
Minimum
Price -
.0025 =
$6.25/contract for the nearest expiring quarterly options
contract; .005 = $12.50/contract or the serials and first
four quarterly options and the first two quarterly
expirations and serials in the 1-Year Mid-Curves and both
quarterly expirations of the 2-Year Mid-Curves; .01 =
$25.00/contract for the last two quarterly options and the
last two quarterly expirations of the 1-Year Mid-Curves. For
trades in the fifth and sixth quarterly options (the "Reds")
half-tick trading is only allowed for options trading at a
price of 5 ticks or less.
Contract
Months -
Quarterly
options: the nearest 6 March quarterly expiration months and
2 serial months; One-year Mid-Curves: the nearest 4
quarterly expirations and 2 serial months; Two-year
Mid-Curves: 2 March quarterly expirations
Regular
Trading Hours (Central Time) -
7:20 a.m.
- 2:00 p.m.
GLOBEX
Trading Hours (Central Time) -
2:13 p.m.
- 7:05 a.m.; on Sunday, trading begins at 5:30 p.m.
Last
Trading Day -
Quarterly
options: second London bank business day immediately
preceding the third Wednesday of the contract month; Serial
and Mid-Curve options: Friday immediately preceding the
third Wednesday of the contract month.
|
