Introduction to Eurodollar Futures and Options

A benchmark for investors globally, Eurodollar futures provide a valuable, cost-effective tool for hedging fluctuations in short-term U.S. dollar interest rates. Eurodollars are U.S. dollars deposited in commercial banks outside the United States.

Eurodollar futures prices reflect market expectations for interest rates on three-month Eurodollar deposits for specific dates in the future. The final settlement price of Eurodollar futures is determined by the three-month London Interbank Offered Rate (LIBOR) on the last trading day.

Eurodollar futures were the first futures contract to be settled in cash, rather than physically-delivered. A total of 40 quarterly futures contracts, spanning ten years, plus the four nearest serial (non-quarterly) months are listed at all times. Serial Eurodollar futures are identical to the quarterly contracts except they expire in months other than those in the March, June, September and December quarterly cycle. Today approximately 98% of Eurodollar futures trade electronically on CME Globex electronic trading platform. 

Benefits of Eurodollars

  • Unsurpassed liquidity - consistently tight bid/offer spreads
  • Lower transaction costs
  • Diverse trading opportunities
  • Price transparency
  • Mid-curve options offer a low premium, high time decay

Packs and Bundles

Packs and Bundles provide convenient alternatives for executing strips of Eurodollar futures.

Eurodollar Packs are the simultaneous purchase or sale of an equally weighted, consecutive series of four Eurodollar futures contracts, quoted on an average net change basis from the previous day’s close. Packs, like Eurodollar futures, are designated by a color code that corresponds to their position on the yield curve. There are always 37 Packs listed for trading at a given time. The most common are: Red, Green, Blue, Gold, Purple, Orange, Pink, Silver and Copper, corresponding to Eurodollar futures years 2-10, respectively.

Eurodollar Bundles allow you to simultaneously buy or sell consecutive series of Eurodollar futures in equal proportions, typically beginning with the front quarterly contract. This means that a 5-year “strip” comprised of 20 individual contracts can be executed with just one transaction.

The price of a Eurodollar Pack or Bundle is quoted in terms of the average net change from the previous day’s settlement prices for the entire group of contracts in the pack or bundle. Bundles and Packs are quoted in minimum .25 tick increments.


Eurodollar Options

Options on Eurodollar futures are among the most actively traded exchange-listed interest rate options contracts in the world, trading over $1.2 trillion in notional value per day in 2016. The liquidity of Eurodollar options offers traders and hedgers an opportunity to take advantage of their views on the direction of U.S. interest rates. Opportunities range from high gamma one-week options, to high vega options expiring up to four years in the future.

Eurodollar options provide the ability to limit losses while maintaining the possibility of profiting from favorable changes in the futures prices. All Eurodollar options are American-style, meaning that the options may be exercised on or before expiration.

Mid-Curve Options

In addition to 16 quarterly and four serial options, Eurodollars also offer Mid-Curve options. Mid-Curve options are short-dated American-style options on deferred Eurodollar futures contracts, one, two, three, four and five years from the options expiration date. These options give the ability to trade options expiring at the same time on different parts of the curve. Because they are short-dated, Mid-Curve options offer a low premium, high time decay alternative in this segment of the yield curve.

Weekly expirations on the 1-year, 2-year and 3-year Mid-Curve options are also listed, which allow you to take a view on upcoming economic releases and the effects upon U.S. interest rate markets.


Contract Details

Contract Unit Eurodollar interbank deposit having approximately $1 million principal value, for three-month term to maturity, for spot settlement on the 3rd Wednesday of the contract month.
Minimum Price Fluctuation

Nearest expiring contract month:
One quarter of one interest rate basis point = 0.0025 price points = $6.25 per contract.

All other contract months:
One half of one interest rate basis point = 0.005 price points = $12.50 per contract.

The “new” nearest contract begins trading in 0.0025 increments on the same trade date as the last trading day in the expiring “old” nearest contract.

Price Quotation IMM price points: 100 points minus the three-month London interbank offered rate for spot settlement on the 3rd Wednesday of contract month. E.g., a price quote of 97.45 signifies a deposit rate of 2.55 percent per annum. One interest rate basis point = 0.01 price points = $25 per contract.
Trading Hours SUN - FRI: 5:00 p.m. - 4:00 p.m. CT
Product Code CME Globex: GE
CME ClearPort: ED
Clearing: ED
Listed Contracts Nearest 40 months (i.e., 10 years) in the March Quarterly cycle (Mar, Jun, Sep, Dec) plus the nearest 4 “serial” months not in the March Quarterly cycle. The new March Quarterly contract month for delivery 10 years hence is listed on the business day following expiration of the nearest March Quarterly contract month.
Settlement Procedures Eurodollar Future Settlement Procedures
Termination Of Trading Second London bank business day before 3rd Wednesday of the contract month. Trading in expiring contracts terminates at 11:00 a.m. London time on the last trading day.
Position Limits CME Position Limits
Exchange Rulebook CME 452
Block Minimum Block Minimum Thresholds
Price Limit Or Circuit Price Limits
Vendor Codes Quote Vendor Symbols Listing
Settlement Method Financially Settled
Minimum Price Fluctuation Quarterly and Serial Quoted in IMM Index points.
 
One-quarter of one basis point (0.0025 IMM Index point = $6.25) for option whose underlying futures contract is the nearest expiring futures contract month.
 
One-quarter of one basis point (0.0025 = $6.25) when option premium is no greater than five ticks and option contract month is any of nearest 2 March Quarterly months or nearest 4 Serial months.
 
One-half of one basis point (0.005 = $12.50) for all other contract months.
 
Cabinet prices:  Any option may trade at a price of 0.0025 IMM Index points, whether or not such trade results in liquidation of positions for both parties to the trade.
Note The minimum fluctuation shall be .005 IMM Index point ($12.50, also known as one-half tick). Trades may also occur at a price of .0025 IMM Index point ($6.25, also known as one-quarter tick), whether or not such trades result in the liquidation of positions for both parties to the trade.
Trading Hours CME Globex: SUN-FRI: 5:00 p.m. - 4:00 p.m.
Open Outcry: MON - FRI: 7:20 a.m. - 2:00 p.m.
Product Code CME Globex: GE
CME ClearPort: ED
Open Outcry: Put: PE Call: CE
Clearing: ED
Listed Contracts Serial Nearest 4 Serial (non-March Quarterly) months
Quarterly Nearest 16 March Quarterly months
Termination Of Trading Serial The Friday immediately preceding the third Wednesday of the contract month.
Quarterly The second London bank business day before the third Wednesday of the contract month. Trading in expiring contracts ceases at 11:00 a.m. London Time on the last trading day.
Position Limits CME Position Limits
Exchange Rulebook CME 452A
Block Minimum Block Minimum Thresholds
Price Limit Or Circuit Price Limits
Vendor Codes Quote Vendor Symbols Listing
Strike Price Listing Procedures Strike prices will be listed in intervals of 12.5 basis points (0.125) in a range of 150 basis points above and 150 basis points below the strike closest to the previous day's underlying futures settle price. Strike prices will be listed in intervals of 25 basis points (0.25) in a range of 550 basis points above and 550 basis points below the strike closest to the previous day's underlying futures settle price.
Exercise Style Options are American Style and are exercised by notifying the Clearing House by 7:00 p.m. CT on the day of exercise. Unexercised options shall expire at 7:00 p.m. CT on the last trading day. In-the-money options that have not been exercised shall be automatically exercised following expiration in the absence of contrary instructions.
Settlement Method Deliverable
Underlying Eurodollar Futures
Minimum Price Fluctuation Quoted in IMM Index points.
 
One-half of one basis point (0.005 = $12.50) for all contract months.
 
Cabinet prices:  Any option may trade at a price of 0.0025 IMM Index points, whether or not such trade results in liquidation of positions for both parties to the trade.
 
Trading Hours CME Globex: Sunday - Friday : 5:00 p.m. – 4:00 p.m. CT with a 60-minute break each day beginning at 4:00 p.m. CT
Open Outcry: MON - FRI: 7:20 a.m. - 2:00 p.m.
Product Code CME Globex: GE0
CME ClearPort: E0
Open Outcry: E0
Clearing: E0
Listed Contracts Nearest 4 March Quarterly months.
Nearest 4 Serial (non-March Quarterly) months.
Termination Of Trading The Friday immediately preceding the third Wednesday of the option expiration month.
Position Limits CME Position Limits
Exchange Rulebook CME Chapter 452A
Block Minimum Block Minimum Thresholds
Price Limit Or Circuit Price Limits
Vendor Codes Quote Vendor Symbols Listing
Strike Price Listing Procedures Strike prices will be listed in intervals of 12.5 basis points (0.125 price points) in a range of 150 basis points above and 150 basis points below the strike price closest to the previous daily settlement price for the underlying futures contract.
Strike prices will be listed in intervals of 25 basis points (0.25 price points) in a range of 550 basis points above and 550 basis points below the strike price closest to the previous daily settlement price for the underlying futures contract.
Exercise Style Options are American Style and are exercised by notifying the Clearing House by 7:00 p.m. CT on the day of exercise. Unexercised options shall expire at 7:00 p.m. CT on the last trading day. In-the-money options that have not been exercised shall be automatically exercised following expiration in the absence of contrary instructions.
Settlement Method Deliverable
Underlying Eurodollar Futures
Minimum Price Fluctuation One-half of one basis point (0.005 = $12.50).
Trading Hours CME Globex: Sunday - Friday : 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m.CT) with a 60-minute break each day  beginning at 5:00 p.m.(4:00 p.m. CT)
Open Outcry: MON - FRI: 7:20 a.m. - 2:00 p.m.
CME ClearPort: Sunday - Friday : 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m.CT) with a 60-minute break each day  beginning at 5:00 p.m.(4:00 p.m. CT)
Product Code CME Globex: E01-E05
CME ClearPort: 1K-5K
Open Outcry: 1K-5K
Clearing: 1K-5K
Listed Contracts Weekly expirations including the serial/quarterly Mid-curve options. Two weekly expirations of each year (1-Year, 2-Year and 3-Year) will be listed at any one given time.
Termination Of Trading Each Friday that is not an expiration day for a Quarterly or Serial 1-Year, 2-Year or 3-Year Mid-Curve Option.
Position Limits CME Position Limits
Exchange Rulebook CME Chapter 452A
Block Minimum Block Minimum Thresholds
Price Limit Or Circuit Price Limits
Vendor Codes Quote Vendor Symbols Listing
Strike Price Listing Procedures Strike prices will be listed in intervals of 12.5 basis points (0.125) in a range of 150 basis points above and 150 basis points below the strike closest to the previous day's underlying futures settle price.
Strike prices will be listed in intervals of 25 basis points (0.25) in a range of 550 basis points above and 550 basis points below the strike closest to the previous day's underlying futures settle price.
Exercise Style Options are American Style and are exercised by notifying the Clearing House by 7:00 p.m. CT on the day of exercise. Unexercised options shall expire at 7:00 p.m. CT on the last trading day. In-the-money options that have not been exercised shall be automatically exercised following expiration in the absence of contrary instructions.
Settlement Method Deliverable
Underlying Eurodollar Futures