Ever since World War II the amount of U.S. dollars abroad sharply increased. This meant that foreign banks had U.S. dollars in their custody and their jurisdiction. Today, the eurodollar is similarly not under the jurisdiction of the Federal Reserve because it is a U.S. dollar time deposit held in foreign banks. There are higher margins on the Eurodollar as a result of fewer regulations. A common use for Eurodollar futures contracts is for a company or a bank to secure the current interest rate on money it expects to borrow at a later time.
|Eurodollar Contract Specifications|
|Underlying Unit||Eurodollar Time Deposit having a principal value of USD $1,000,000 with a three-month maturity.|
|Price Quote||Quoted in IMM Three-Month LIBOR index points or 100 minus the rate on an annual basis over a 360 day year (e.g., a rate of 2.5% shall be quoted as 97.50). 1 basis point = .01 = $25.|
|One-quarter of one basis point (0.0025 = $6.25 per contract) in the nearest expiring contract month;
One-half of one basis point (0.005 = $12.50 per contract) in all other contract months.
The “new” front-month contract begins trading in 0.0025 increments on the same Trade Date as the Last Trading Day of the expiring “old” front-month contract.
|Contract Months||Mar, Jun, Sep, Dec, extending out 10 years (total of 40 contracts) plus the four nearest serial expirations (months that are not in the March quarterly cycle). The new contract month terminating 10 years in the future is listed on the Tuesday following expiration of the front quarterly contract month.|
|Last Trading Day||The second London bank business day prior to the third Wednesday of the contract expiry month. Trading in the expiring contract closes at 11:00 a.m. London Time on the last trading day.|
|Settlement Procedure||Eurodollar Futures Settlement Procedure|
|Block Minimum||Block Trade Minimum|
|All or None Minimum||All or None Minimums|
(All times listed are Central Time)
|Open Outcry: MON-FRI: 7:20am – 2:00pm
CME Globex: SUN – FRI: 5:00pm – 4:00pm CT
|Ticker Symbol||Open Outcry: ED
CME Globex: GE
|Exchange Rules||These contracts are listed with, and subject to, the rules and regulations of CME.|
Eurodollar futures represent the most traded of the interest rates around the world. Eurodollar futures can be used as a hedging tool for rate fluctuations on Eurodollars themselves. Several trading strategies can be employed with Eurodollar futures including bundles, pack, butterflies and the ability to hold short and long positions.
85% of the Eurodollar futures are traded on CME Globex Platform. This electronic trading offers real time market prices and transparency.
It is important to note that Eurodollars are low risk, but not risk free investments.
Last updated May 2013
Recent Posts on the Eurodollar
- Market Spotlight: Eurodollar (2/12/2015) - Ever since World War II, the amount of U.S. Dollars abroad sharply increased. This meant that foreign banks had U.S. Dollars in their custody and their jurisdiction. Today, the Eurodollar is similarly not under the jurisdiction of the Federal Reserve because it is a U.S. Dollar time deposit held in foreign banks.