What are Eurodollars?
Eurodollars are time deposits denominated in U.S. dollars that are deposited in commercial banks outside the U.S., and they have long served as a benchmark interest rate for corporate funding. The Eurodollar futures contract, developed and introduced by CME in 1981, represents an interest rate on a three-month deposit of $1 million. The Eurodollar futures contract is now the most actively traded futures contract in the world. Open interest in the contract recently surpassed four million.
Where does the Eurodollar $25 tick come from?
The Eurodollar tick reflects the dollar value of a 1/100 of one percent change in a $1 million, 90-day deposit. It is determined by this equation:
$1,000,000 notional x .0001 x 90/360 = $25
By what time must you notify the clearing house that you with to exercise the option?
You must notify your clearing firm, and your clearing firm must notify the Clearing House, by 7:00 p.m. The Clearing House can be contacted at 312-207-2525.
When are the new contracts listed?
Following the expiration of a quarterly Eurodollar futures contract, a fortieth quarterly contract is available to trade the following business day. Since the vast majority of Eurodollar futures contracts expire on a Monday, the new contract is generally available on the Tuesday following a Monday expiration day.
The lag between expiration of the near month future and the listing of the fortieth Eurodollar contract results in a one-day delay in listing a new "Copper" (Year 10) pack after the expiration of the front quarterly future.
By how much does an option have to be in-the-money for automatic exercise to take place at expiration?
Automatic expiration takes place only at expiration and not before. To be automatically exercised at expiration, an option needs only to be in-the-money by the smallest price increment possible (e.g., a quarter tick).
At expiration, all in-the-money Eurodollar options are exercised automatically, in the absence of contrary instructions delivered to the Clearing House.
What are the rules regarding the listing of 12.5 point strike prices?
Quarterly and Serial options: On the expiration day of options in the March quarterly cycle, strike prices in 12.5-point increments will be listed on the two serial, and next March quarterly option expirations.
For example, on Monday, September 13, 1999 (expiration day for Sep 99 futures and options), 12.5-point strike prices would be listed on October and November serial options, and December quarterly options.
One-year Mid-Curve options ("shorts"): the first quarterly and two serial expirations are eligible to trade in 12.5-point strike price increments at any given time.
If you're short an in-the-money option, when will you know you have been assigned? When will you be assigned a futures position?
You will be informed before the markets open on the following business day that you have been assigned, and you’ll be assigned a futures position as of the day the assignment was made. Assignments are made through a process of random selection of clearing firms with open short positions in the specific option.
What is the dollar value of "cabinet" in the Eurodollar options?
Cabinet in Eurodollar options is the minimum premium value of $6.25 or "1/4 tick."