How Futures Tick Values Relate to Price Multipliers and Contract Tenors
Summary
The document explains why tick size, tick value, and a contract’s stated notional do not always fit a simple tick-value-to-tick-size formula. For CME Eurodollar futures, a fixed price multiplier converts a price change into position value. The minimum tick changes for the nearby contract, changing the value of one tick while leaving the value of a given price move unchanged.
The ICE SOFR examples show why the contract’s quoted notional also matters: the one-month and three-month contracts apply different accrual fractions to an annually quoted rate. As a result, the reported tick value reflects the contract’s pricing convention and tenor, rather than just dividing notional by tick size. These examples clarify contract-specific mechanics; they do not establish a universal formula, so traders need to check each contract’s specifications.
Key ideas
- A price multiplier converts futures price changes into changes in contract value.
- The minimum tick can change as a contract becomes the front month without changing the multiplier.
- Tick value depends on the contract’s pricing convention and cannot always be inferred by dividing notional by tick size.
- For SOFR futures, the quoted annual rate and contract tenor determine the accrual fraction applied to price changes.
- Check each futures contract’s specifications to understand its tick value.
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Full text
# Relationship between tick size, tick value, and contract size? # Relationship between tick size, tick value, and contract size? For many options and futures I can see that Contract Size = Tick Value / Tick Size Are these values always related like this, and if so what does the relationship mean? ## Answer by Phil H (score 2, accepted) https://quant.stackexchange.com/a/45764 ## CME ED Futures If we take 3m CME ED Libor IR futures, the value is \$2,500 * IMM - that is, the movements in the contract price are amplified by \$2,500. If the contract moves from 95.00 to 95.01, that means a movement in the value of a position of 1 contract by +0.01*\$2,500=\$25. That relationship does not change, but the tick size does change when each ED future becomes the front contract. At that point the minimum tick changes from 0.005 (\$12.50) to 0.0025 (\$6.25). The factor is the same, so a movement by 0.01 is always $25, but now I can trade at 95.8875 instead of only at 95.8900 or 95.8850. So really the tick value is derived from the notional contract value and the tick size, not the other way around. ## 1m vs 3m ICE SOFR Futures By contrast, ICE states that a 1m USD SOFR future has a contract value of \$12,000,000, and has a tick size and value of 0.0025 and \$25 respectively. But 25/0.0025 does not equal \$12m. Instead they are quoting the notional on a 1y rate, as the SOFR rate is quoted annually, and applying a factor of 1/12 to get the value of the change for a 1m future. This matches with a 3m ICE SOFR future whose contract value is \$4,000,000, where the factor (for 3m instead of 1m) is 1/4, giving the same \$1,000,000 multiple between tick size and value; they are also \$25 per 0.0025 tick.
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