Question

1. A trader enters into a long position in 75 Eurodollar futures contracts. Compute the P&L of the trader when the corresponding futures price quote decreases by 10 basis points (example: from 98.50 to 98.40)?

Answer 1

the eurodollar future has the tick size (minimum fluctuation) is one-quarter of one basis point (0.0025 )

the underlying notional value in the eurodollar future is $1 million

that means that for each basis point change in the price of eurodollar future, the pay off is $2500 ($1 million * 0.0025)

the trader has entered into a long position at 98.50 and the prices has declined to 98.40, which means he has made a loss of 10 basis points (98.50 - 98.40)*100

loss on position = 10 * $2500 ==> $25,000