To trade eurodollar futures contracts, you’ll need an account with a brokerage firm that specializes in futures trading, as well as a margin deposit.
Is it still possible to trade Eurodollar futures?
The open outcry eurodollar contract symbol is ED, and the electronic contract symbol is GE. Eurodollar futures are traded electronically on the CME Globex electronic trading platform from 6 p.m. to 5 p.m. EST on Sunday through Friday. As with other financial futures contracts, the expiration months are March, June, September, and December. The tick size (minimum fluctuation) in the nearest expiring contract month is one-quarter of a basis point (0.0025 = $6.25 per contract) and one-half of a basis point (0.005 = $12.50 per contract) in all other contract months.
Eurodollar futures are traded where?
The Eurodollar futures contract, which is traded on the Chicago Mercantile Exchange, is a financial futures contract based on these deposits (CME). EuroDollar futures contracts, in particular, are derivatives on the interest rate paid on those deposits. A Eurodollar futures contract is a cash-settled futures product whose price swings in tandem with the LIBOR interest rate. Eurodollar futures allow businesses and banks to lock in an interest rate on money they want to borrow or lend in the future. The notional or “face value” of each CME Eurodollar futures contract is $1,000,000, while futures leverage allows one contract to be traded with a margin of around $1,000.
The market’s prediction of the 3-month USD LIBOR interest rate expected to prevail on the settlement date determines the price of CME Eurodollar futures. An interest rate of 100.00 – 95.00, or 5%, is implied by a price of 95.00. A contract’s settlement price is defined as 100.00 less the official British Bankers’ Association 3-month LIBOR fixing on the day the contract is settled.
What is the purpose of Eurodollars?
U.S. dollars deposited in foreign banks are referred to as Eurodollars. Assume that someone deposits $5,000 in a Brazilian bank account. Eurodollars are the currency in question. It’s also known as eurocurrency because it’s money issued by one government and deposited in a separate country’s account. If someone deposited 5,000 Mexican pesos at the same Brazilian bank, the money would be treated as eurocurrency, but not as eurodollars. As “dollar” is the nickname for US cash, eurodollars only refer to US dollars that have been deposited in another country.
What is the Eurodollar alternative?
Eurodollar options allow you to limit your losses while still having the opportunity to profit from positive changes in futures prices. All Eurodollar options are American-style, which means they can be exercised at any time before or after expiration.
What is CME Eurodollar?
Specs. Eurodollar futures and options are the favored tool of traders to communicate their views on future interest rate movements because they represent a key building component of the financial system. You can efficiently target interest rate risks that matter to you with unequaled book depth and deep liquidity out more than five years.
What are the prospects for Eurodollar futures?
Eurodollar exposure dating after June 30, 2023 will be automatically converted to CME SOFR Futures with a predetermined spread. The change in the futures and options markets has accelerated, with overall SOFR exposure beyond 2023 rapidly increasing.
What is the meaning of Eurodollar?
The phrase eurodollar refers to deposits in US dollars held by foreign banks or American bank branches abroad. Eurodollars are not subject to Federal Reserve Board regulation, including reserve requirements, because they are stored outside the United States. Dollar-denominated deposits that were not subject to US banking laws were virtually exclusively held in Europe at first (hence, the name eurodollar). They’re now extensively held in branches in the Bahamas and the Cayman Islands, as well.
What is the fundamental rationale for the Eurodollar market’s existence?
One of the reasons for the expansion in the international short-term capital market is the Eurodollar. It’s also important for funding international trade because it allows traders to import and export using less expensive means.
Who are the Eurodollar market’s participants?
Large corporations, particularly international firms, commercial banks, and central banks are the primary lenders in the Euro-dollar market. Commercial banks are the most common intermediaries, whereas end borrowers of all economic and institutional stripes borrow in the market.