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Eurodollar Packs
Eurodollar Packs

q1

What are Eurodollar packs?

 

a1

Packs are the 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.  This quoting method is similar to that for Eurodollar bundles.

 

 

q2

Why packs?

a2

Packs are an alternative method of executing a strip trade.  All four contract months in the strip are executed in a single transaction, eliminating the inconvenience of partial fills, particularly in the deferred contract months.

 

 

q3

How many are there?

a3

Packs, like Eurodollar futures, are designated by a color code that corresponds to their position on the yield curve. There are generally 10 different packs trading at any given time, White, Red, Green, Blue, Gold, Purple, Orange, Pink, Silver, and Copper, corresponding to Eurodollar futures years 1-10, respectively.

 

 

q4

How are packs quoted?

a4

Packs are quoted in minimum one-quarter of a basis point increments, e.g., +2.5/bid +2.75/ask.

 

 

q5

How are prices assigned to individual legs?

a5

Any price consistent with the agreed upon average net change for the pack at which the trade occurred may be assigned to the individual legs.  Because of this, packs are classified as spread trades.  Any prices can be assigned to individual contracts, as long as they are consistent with the agreed-upon average net change.  For example, if the purple (year 6) strip was purchased at an average net change of +2, actual prices for the four contracts that make up that strip could be +1, +1, +3, +3.  In the event that individual prices cannot be agreed upon, the average net change will be added to or subtracted from the previous day's settlement price.  If the pack trades in a half-tick increment, the last two contracts in the pack will be adjusted to make individual contract prices consistent with the pack price.