Eurodollar Futures: The BasicsFrederick Sturm Peter Barkerfrederick.sturm@cmegroup.com peter.barker@cmegroup.com312 930 1282 312 930 85549 December 1981. Chicago Mercantile Exchange launches Three-Month Eurodollar futures. It goes badly. Within months, financial commentators cluck over “sluggish activity and lack of liquidity…so disappointing that some retail commodity speculators are all but ready to bury the contracts.”1That was then.Thirty years on, Three-Month Eurodollar futures reign as the most innovative, flexible, highly traded, and widely used of all interest rate derivatives. This user’s guide lays out their basics: how they work, how they trade, how they relate to their companion money markets. Contents2Eurodollar Futures Contract TermsUnit3 Trading4 Delivery Month and Last Trading Day6 Price = 100 Minus Rate8 Contract Size and Price Increments8 Notional Contract Size = $1 Million … More or Less10Trading Eurodollar Futures10 Bundles and Packs12 Calendars, Flies, Condors, and Other Combinations15 How Combination Prices Become GE Contract Prices19 CME Globex Trade Matching Algorithms for GE Futures21 Daily Settlement Prices22Almost a Forward Rate, but Not Quite: Convexity Bias29 One-Month Eurodollar Futures31 Appendix: A Concise Guide to US Dollar BBA LIBOR®Panel31 Contributor32 The BBA LIBOR® Standard34 The BBA LIBOR® Fix35 Resources 1 Reier, Sharon, “The disappointing debut of Eurodollar futures”, Institutional Investor, May 1982.

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