Calculating Eurodollar Futures P&L from Price Changes

# Calculating PnL on Eurodollar futures trading


# Calculating PnL on Eurodollar futures trading












I'm trying to understand how the published prices for futures relate to how much is actually spent when you execute. For example: looking at GEH8 on 4/19/2017.

The quotes look like 98.50, 98.515, but I believe that there is a display factor of .0001.

My question is: if you execute 250 contracts at \$91.51, and it closes at \$91.505, what is the unrealized PnL?

## Answer by FinanceGuyThatCantCode (score 2, accepted)

https://quant.stackexchange.com/a/34360

First, I would say that it is realized PnL because with futures, you always have to settle up at the end of the day in the margin accounts. If you bought the futures at 98.51, then you only post margin since the futures contract has zero value. If the contract settled at 98.505, then you lost 0.005 on the contract. Each Eurodollar contract is on 1MM notional, but over the 3M period, it is like a 250K notional. The payoff is 2,500 per point per contract, so you have a final payoff of 250 * 2,500 * (-0.005) = -250 * 12.50 = -3,125. The 250 factor is the number of contract you referenced in your question.

It is worthwhile to think of a futures contract as a series of one day forward contracts that get settled up each day in your margin account and you have the option of exiting at anytime. This way of thinking can help to understand an important feature of the Eurodollar contracts - i.e. the convexity correction that helps to convert futures prices to forward prices and vice versa. This is a feature of any futures contract, but is most pronounced and studied for Eurodollar contracts since they have expiries out to 10 years and the convexity correction is bigger for longer dated contracts.

## Answer by nbbo2 (score 3)

https://quant.stackexchange.com/a/34361

This document may be helpful Understanding Eurodollar futures

The value of a 1 point price change (for example from 98 to 99) is equal to 2500 USD per contract (this is $1000000\frac{90}{360}1\%$ since the nominal amount for the loan is one million and interest is paid every 3 month on 30/360 convention). Equivalently the value of a 1 bp change (from 98 to 98.01) is 25 USD.

In general for any futures contract once you know the "value of 1 point" on one contract you can calculate the P&L as Value_of_1_point*Price_Change_in_points*Contracts .

## Answer by MBfinance (score 0)

https://quant.stackexchange.com/a/42896

That’s a one basis point move. Which implies a P/L of +25/-25 depending on your position. In the example you have provided if you were to SELL 250 contracts, then each 0.01 DROP in the \$-price would imply a +\$25 PER CONTRACT to your account. If you were to BUY 250 contracts, it would be the opposite: Each \$0.01 INCREASE in the \$-price would imply +\$25:

$$1.000.000\$ \cdot \frac{90}{360} \cdot 0.0001= \$25$$

per contract and finally $\$25 \cdot 250 = \$6.250$.