Question

A trader enters into a short position in ten Eurodollar futures contract (sell 10 contracts). How much does the trader gain (or lose) when the futures price quote increases by 15 basis points?

Answer 1

A trader enter into a short position in ten Euro dollar future contract. He is position to deliver the share underying in the future contract. Increase in the future price will alwasys give gain to the short holding position.

In the given case there is increase in the future price by 15 basis points, so definetly it is gain to the Trader.

Gain = 10 contacts * 0.15 = 1.5 contacts price,

For suppose if the contract price is $1,000,000/- then the gain will be = $ 1,000,000 * 1.5 = $1,500,000/-

Generally erudollar future contract size will be $1,000,000/- so the answer will be above only.