Future Markets and Contracts Part E

Reading 72

LOS

e. describe the characteristics of the following types of futures contracts: Eurodollar, Treasury bond, stock index, and currency.
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Eurodollar futures contract

Trade Eurodollar Futures at Trade Center, LLC.

Eurodollars are U.S. dollars on deposit in commercial banks located outside of the United States. Eurodollars deposits play a major role in the international capital market, and they have long served as a benchmark interest rate for corporate funding.

The Eurodollar futures contract reflects the London Interbank Offered Rate (LIBOR) for a three-month, $1 million offshore deposit. Eurodollar deposits are direct obligations of the commercial banks accepting the deposits and are not guaranteed by any government. Although they represent low-risk investments, Eurodollar deposits are not risk-free.

CME developed and launched Eurodollar 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 four million mark.



CME Eurodollar futures are cash-settled, therefore, there is no delivery of a cash instrument upon expiration because cash Eurodollar 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 contract’s inception, it has become one of the most versatile trading vehicles offered on the listed markets, offering numerous opportunities for hedgers and arbitrageurs. The contract’s exceptional growth and its adaptability and versatility continues to evolve due to nonstop enhancements. As a result, today’s Eurodollar 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.

Contract Specification for Eurodollar Futures

Trade Unit:
Eurodollar Time Deposit having a principal value of $1,000,000 with a three-month maturity.

Point Descriptions:
1 point = .01 = $25.00

Contract Listing:
Mar, Jun, Sep, Dec, Forty months in the March quarterly cycle, and the four nearest serial contract months.




Hours: 7:20 a.m.-2:00 p.m.Holidays LTD(Monday 5:00 a.m.)


Minimum Fluctuation:
Regular 0.01=$25.00
Half Tick 0.005=$12.50
Quarter 0.0025=$6.25 for nearest expiring month.

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Treasury Bond Futures

Contract Specification for 30 year T-Bond Futures

Contract Size

U.S. Treasury notes having a face value at maturity of $100,000 or multiple thereof.

Deliverable Grades

U.S. Treasury bonds that, if callable, are not callable for at least 15 years from the first day of the delivery month or, if not callable, have a maturity of at least 15 years from the first day of the delivery month. The invoice price equals the futures settlement price times a conversion factor plus accrued interest. The conversion factor is the price of the delivered bond ($1 par value) to yield 6 percent.

Tick Size

Minimum price fluctuations shall be in multiples of one thirty-second (1/32) point per 100 points ($31.25 per contract) except for intermonth spreads, where minimum price fluctuations shall be in multiples of one-fourth of one-thirty-second point per 100 points ($7.8125 per contract). Par shall be on the basis of 100 points. Contracts shall not be made on any other price basis.

Price Quote
Points ($1,000) and thirty-seconds of a point; for example, 80-16 equals 80 16/32

Contract Months
Mar, Jun, Sep, Dec

Last Trading Day
Seventh business day preceding the last business day of the delivery month.

Last Delivery Day
Last business day of the delivery month.

Delivery Method
Federal Reserve book-entry wire-transfer system

Trading Hours
Open Auction: 7:20 am - 2:00 pm, Central Time, Monday - Friday
Electronic: 7:01 pm - 4:00 pm, Central Time, Sunday - Friday
Trading in expiring contracts closes at noon, Central Time, on the last trading day


Daily Price Limit
None
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Stock Index Futures Contracts

DJIA Futures ($10 Multiplier)


Contract Size
Ten dollars ($10) times the Dow Jones Industrial Average Index. The DJIA is a price-weighted index of thirty (30) stocks.

Final Settlement Day
The third Friday of the contract month.
Settlement
Cash settlement on the final settlement day. The final settlement price is $10 times a Special Opening quotation of the index.

Tick Size
Minimum price increment is one index point (equal to $10 per contract).

Price Quote
The DJIA Index, quoted in index points.

Contract Months
Mar, Jun, Sep, Dec. Four nearest months in March quarterly cycle and two additional December contracts listed at all times.

Last Trading Day
The trading day preceding the final settlement day.

Trading Platform
Open Auction and Electronic.

Trading Hours
Monday: Thursday 3:30 pm - 4:30 pm and 5:00 pm - 8:15 am next day
Sunday: 5:00 pm - 8:15 am next day
Trading in expiring contracts ceases at 3:15 p.m. Central Time on the last trading day.

Ticker Symbols
Open Auction: DJ
Electronic: ZD

Fungibility

BIG Dow futures ($25 multiplier), mini-sized Dow futures ($5 multiplier), and DJIA futures ($10 multiplier) are fungible contracts

Daily Price Limit
Successive 10%, 20%, and 30% limits. For details, please see CBOT Regulation 1008.01.

Position Limits
The aggregate position limit in BIG Dow futures ($25 multiplier), mini-sized futures and options ($5 multiplier), and DJIA futures and options ($10 multiplier) is 50,000 DJIA futures ($10 multiplier) equivalent contracts, net long or short in all contract months combined.

http://www.cbot.com/cbot/pub/cont_detail/1,3206,1411+14424,00.html
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currecny futures

CME Japanese Yen Futures
Trade Unit 12,500,000 Japanese yen
Point Descriptions 1 point = $.000001 per Japanese yen = $12.50 per contract
Contract Listing Six months in the March Quarterly Cycle, Mar, Jun, Sep. Dec.

Minimum Fluctuation
Regular 0.000001=$12.50
Calendar Spread 0.0000005=$6.25
All or None 0.0000005=$6.25

http://www.cme.com/trading/prd/fx/japanese_FCS.html