Calculating Live Cattle Futures Tick and Point Value
Summary
This explanation derives the dollar value of a live cattle futures price movement from the contract size and the unit used to quote prices. One contract represents 40,000 pounds, and the quoted price is in cents per pound. A one-cent-per-pound change therefore changes the contract’s value by $400. The minimum fluctuation is smaller: a tick of 0.025 cents per pound corresponds to $10 for the contract, so there are 40 ticks in a full price point.
The central lesson is to distinguish the quoted price unit, tick size, and contract quantity before calculating exposure. Multiplying the quoted price by the 40,000-pound contract size gives the contract notional when the price is expressed in dollars per pound. The question’s simulator output illustrates this arithmetic. The answer also clarifies that 0.00025 is a dollar-per-pound amount, while the displayed futures price is in cents per pound. The discussion focuses on this contract’s units and does not generalize every agricultural contract specification.
Key ideas
- A live cattle contract represents 40,000 pounds.
- The quoted price is in cents per pound, so a one-cent price move changes contract value by $400.
- A 0.025-cent tick is worth $10 per contract.
- There are 40 minimum ticks in a one-cent price point.
- Check price units before calculating tick value, point value, or notional exposure.
Tags
Full text
# How to calculate point value for live cattle futures contract?
# How to calculate point value for live cattle futures contract?
I am trying to understand how to calculate point value for each live cattle futures contract by looking at the contract's spec on CME website.
I understand that 0.00025 * 40,000 = $10 which is tick value or in other words dollar amount of minimum fluctuation. However, I do not understand how can I find, how many ticks are in a point?
When I used CME simulator, the info displayed matches my understanding. As you can see, tick size is 0.025 which is 1/40 of a point so `$10 * 40` gives us $400 which is dollar equivalent of a point value. If we multiply that with price, we get notional value of the contract.
Now my question is, how could I figure out from the contract specs? I am able to do this for most of the contracts especially index futures but not some agricultural ones.
Thank you for your help!
```
# Live Cattle
LEQ1
Contract Size: 40000.0
Tick Size: 0.025
Tick Value: $10 (1 points has 40 ticks, so 1 point is 400)
Last Price: $121.850
Notional Value of Order: $48,740.00 ( = 121.850 * 400)
Margin committed to trade: $1,760.00
Side: BUY
Qty: 1
Type: LMT
Limit Price: 121.85
TIF: DAY
```
https://www.cmegroup.com/trading/agricultural/livestock/live-cattle_contract_specifications.html
## Answer by nbbo2 (score 4, accepted)
https://quant.stackexchange.com/a/65626
One contract is for 40000 pounds of weight, the price is in US cents per pound so when price increases by "one" say from 100 to 101 (i.e. one cent of a USD increase in price per pound) you make 0.01*40000 = 400 dollars.
Why 0.00025 per pound = \$10.00. They should have said 0.00025 $ per pound, to be clear, then 0.00025*40000 = 10 dollars.
## Answer by goulashsoup (score 0)
https://quant.stackexchange.com/a/79828
Just to extend the given answer: I think the easiest way to understand the (Big) Point Value is this:
> big_point_value = mininum_asset_units in asset_value_unit mininum_asset_units = The minimum number of assets you MUST buy e.g. for commodities like "Feeder cattle" you can only buy 40000 units. asset_value_unit = The unit of the asset price you see on the chart, e.g. USD for Gold, YEN for USD-YEN, EURO for USD-EUR
Examples:
- IC Markets US DOLLAR-JAPANESE YEN: minimum_asset_units = 1, asset_value_unit = YEN => big_point_value = 1 YENShown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.