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Converting Eurodollar Futures Prices to Interest-Rate Units

Article Quant Q&A · Author: JamieC113
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Summary

The note explains how to interpret Eurodollar futures prices when considering the volatility of options on the contract. Eurodollar futures are quoted near 100 minus an interest rate, so the answer converts a futures price into its corresponding rate by subtracting it from 100. It also applies the same convention to strike prices: a quoted strike is translated into the rate-distance from 100. This reframing is meant to put the underlying and its strikes into basis-point interest-rate terms before interpreting option volatility.

The example uses a September contract quoted at 99.53 and a 99.50 strike to illustrate the conversion. The question mentions a displayed implied volatility and asks how to express it as a standard deviation, but the answer does not provide a full volatility conversion, derivation, or numerical standard-deviation result. It therefore offers a useful contract-quoting convention, not a complete method for translating implied volatility into a forecast distribution. The example is contract-specific, and readers should confirm quote units and conventions for the product and platform they use.

Key ideas

  • Eurodollar futures prices encode an interest rate as 100 minus the quoted price.
  • Convert a futures quote into interest-rate terms before interpreting option volatility.
  • Translate strike prices using the same distance-from-100 convention.
  • The answer clarifies quoting units but does not derive a standard deviation from implied volatility.

Tags

FuturesOptionsVolatilityFixed income
Full text
# Eurodollar futures volatility


# Eurodollar futures volatility












Considering each point is 2500, how can I get the volatility of the jun 24 contract? On tastyworks I'm seeing a 0.7% iv for the contract, how can I translate it to standard deviation? Ex:sp500 15%stdev, gold 20% stdev

## Answer by Steve Becker (score 0)

https://quant.stackexchange.com/a/68401

For the purpose of calculating the option vol of Eurodollars you need to convert the underlying to basis points of interest. Subtract the price from 100 to determine that level. Sep Euros settled at 99.53. 100-99.53 is .47 .47 is the underlying. Additionally, strikes are 100-strike. The 99.50 strike is really the .5 strike.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.