Eurodollar Futures and Options

 

Eurodollar futures are cash-settled contracts whose price moves in response to the LIBOR curve- U.S. Dollar denominated deposits held in non-U.S. commercial banks. There are options available on each of the Eurodollar futures contracts that provide the right but not obligation to be long or short a contract. All quarterly options are cash settled, while all other options are delivered into a futures contract. The contracts are a proxy for the forward AA/AAA Libor-based credit curve. With a notional value of $1Million USD, Eurodollars represent 3-month forward rates, extending out 10 years. Prices are quoted by subtracting the yield of the contract from 100. For example, a contract that had a 1.05% yield would have a price of 98.95 (100-1.05=98.95). Each basis point is equal to $25.00 in value. If someone were to purchase the previously mentioned contract for 98.95 and at the end of the trading day the contract were to settle at 98.96, there would be a gain of $25 on the position.

 
 

Eurodollar Packs/Bundles Matrixes

Eurodollars can be put together into packs and bundles to adjust duration and provide a hedge for LIBOR-related risk. A pack is simply a combination of four consecutive contracts deriving one year of duration. A bundle is an aggregation of consecutive packs. For example, a 3yr bundle thus has 12 contracts encompassing the first three packs. (4yr bundle has 16 contracts, and so on...)

 
 

Eurodollar Bundles

Term Name Comprised of BPV # of Contracts
1-year 1-year Bundle 1st 4 Quarterlies $100 4 Contracts
2-year 2-year Bundle 1st 8 Quarterlies $200 8 Contracts
3-year 3-year Bundle 1st 12 Quarterlies $300 12 Contracts
4-year 4-year Bundle 1st 16 Quarterlies $400 16 Contracts
5-year 5-year Bundle 1st 20 Quarterlies $500 20 Contracts
6-year 6-year Bundle 1st 24 Quarterlies $600 24 Contracts
7-year 7-year Bundle 1st 28 Quarterlies $700 28 Contracts
8-year 8-year Bundle 1st 32 Quarterlies $800 32 Contracts
9-year 9-year Bundle 1st 36 Quarterlies $900 36 Contracts
10-year 10-year Bundle 1st 40 Quarterlies $1,000 40 Contracts
 
 

Eurodollar Packs

Term Color Code Comprised of BPV # of Contracts
1-year White Pack 1st - 4th Quarterlies $100 4 Contracts
2-year Red Pack 5th - 8th Quarterlies $100 4 Contracts
3-year Green Pack 9th - 12th Quarterlies $100 4 Contracts
4-year Blue Pack 13th - 16th Quarterlies $100 4 Contracts
5-year Gold Pack 17th - 20th Quarterlies $100 4 Contracts
6-year Purple Pack 21st - 24th Quarterlies $100 4 Contracts
7-year Orange Pack 25th - 28th Quarterlies $100 4 Contracts
8-year Pink Pack 29th - 32nd Quarterlies $100 4 Contracts
9-year Silver Pack 33rd - 36th Quarterlies $100 4 Contracts
10-year Copper Pack 37th - 40th Quarterlies $100 4 Contracts