Though often confused with the currency of a similar name, a Eurodollar is actually an interest rate product traded on the CME Group. This financial instrument is widely considered one of the most popular - and therefore highly liquid - financial futures markets.
Contract Size: - Eurodollar Time Deposit having a principal value of USD $1,000,000 with a three-month maturity.
Price Quote & Tick Size: Quoted in IMM Three-Month LIBOR index points or 100 minus the rate on an annual basis over a 360 day year (e.g., a rate of 2.5% shall be quoted as 97.50). 1 basis point = .01 = $25. Tick size is one-quarter of one basis point (0.0025 = $6.25 per contract) in the nearest expiring contract month; One-half of one basis point (0.005 = $12.50 per contract) in all other contract months. The "new" front-month contract begins trading in 0.0025 increments at 7:20 a.m, Central Time (CT), after the "old" expiring front-month contract ceases trading at 11:00 a.m. London time on the expiring contract month's last trading day
Contract Months: March, June, September, December
Trading Specs: Open Outcry MON-FRI: 7:20 a.m. - 2:00 p.m. CT and Globex SUN - FRI: 5:00 p.m. - 4:00 p.m. CT.
Daily Price Limit: Consult exchange.
Trading Symbols: ED; GE on Globex
Eurodollars are considered U.S. dollar denominated deposits in banks not in the United States. Although the prefix "euro" is used, the contract has no relationship to European currency. Unlike some of the other interest rate products, they are not guaranteed by any government entity. These US Dollar deposits in banks held in commercial banks outside the jurisdiction of the Federal Reserve can be taken as a reflection of the London Interbank Offered Rate (LIBOR) for a three month offshore deposit.
Deposits of US dollars in foreign banks grew in the second half of the last century, owing partly to our commercial deficits.
Eurodollar futures have been traded on the CME since the end of 1981 and the price - as shown in the contract specifications - is a reflection of the forecasted interest rate at the futures contract's delivery date. For example, a forecast for a 5 percent interest rate would be reflected in a price of 95.00 for the Eurodollar.
The interest rate in question is the LIBOR, the rate at which banks borrow from one another on the London interbank market. It is calculated by Thomson Reuters and published by the British Bankers' Association every day.
In interest rate trading terms, Eurodollar contracts are short term debt instruments.
Key terms for the eurodollar market include:
London Interbank Offered Rate (LIBOR) - the interest rate at which banks are offering to lend money to each other on the London interbank market . This rate is one of the most widely used for short-term interest rates.
IMM - the International Monetary Market, a division of the Chicago Mercantile Exchange which is now part of the CME Group.
Eurodollar futures are often used as part of a hedging strategy for interest rate risk.
Information on the daily LIBOR may be found on the bbalibor website or through other news sources. These rates are worth noting when trading Eurodollar futures. Interest rates or the forecasted changes in interest rates can have a profound effect on the futures price. Inflation or the possibility of inflation may also influence prices. The commonly watched factors which may affect trade include economic reports or events. This may include the following:
* Retail Sales
* Unemployment Claims
* Personal Income
* New Home Sales
* Bank Meetings & Member commentaries
The Tech sector showed bullish earnings. Apple and Qualcomm announced positive earnings at the close last night both beating estimates. Qualcomm does supply Apple with chips so it would be reasonable to assume that the company would also do well. Apple showed a profit of $5.99 billion compared to $3.33 billion at this point last year, sales were 83% higher. (1) Qualcomm raised its outlook for the rest of 2011 and posted $999 million in net earnings while last year they only posted $989 million. (2) American Express beat expectations earning $1.18 billion compared to $885 million last year. The company did show that expenses grew by 21% because of extra marketing and reward programs. (3) The owner of KFC, Taco Bell, and Pizza Hut is YUM which showed as showed flat sales at Taco Bell, a decrease of 3% at Pizza Hut, and a small gain of 1% at KFC. Growth in China helped create a 10% rise in profits. (4) McDonalds showed revenue of $6.1 billion due to Europe sales, giving the company a rise of over 9%. (5)
Unemployment benefits fell last week by 13,000 to a seasonally adjusted average of 403,000. The week before applications rose 31,000. During the recession applications rose as high as 659,000 and a number of around 375,000 is considered a sustainable job growth number. (6) Again, the S&P 500 is near the technical level 1340.00. It seems as though when it is within 5 points the market sells off. Please be mindful of this as the holiday week continues.
- Frank LaMantia, Financials Guru [more]
Feeder cattle futures, like live cattle, provide an opportunity for industry professionals to participate in fair price discovery and possibly try to hedge their interests against feed grain and cattle price changes. The CME Feeder Cattle contract is cash-settled.
Contract Size: 50,000 lbs
Price Quote & Tick Size: cents per pound; minimum fluctuation is $.00025 per pound ($12.50 per contract)
Contract Months: January, March, April, May, August, September, October, November
Trading Specs: Floor trading is conducted 9:05 am to 1:00 pm CT Mon - Fri; Globex trading Mon 9:05 a.m. - Fri 1:55 p.m. CT. Daily trading halts from 4:00 p.m.-5:00 p.m.
Daily Price Limit: $.03 per pound above or below previous day's settlement price
Trading Symbols: FC; GF on Globex
Past performance is not indicative of future results.
***chart courtesy of Gecko Software
[B][CENTER]Feeder Cattle Facts[/CENTER][/B]
Mature cattle, ready to be placed on a feedlot, are referred to as feeder cattle. They generally weigh less than live cattle (animals ready for slaughter) - anywhere from 650 to 850 pounds. The feedlots are often larger commercial operations which bring in feeder cattle to replace the animals sent to slaughter. These feedlots may buy the cattle from individuals or the animals will ultimately belong to an individual who will pay the feedlot for the feed bill.
Feeder cattle are classified according to age, sex, and weight, among other things. Grades range from choice or good down to utility or inferior. Prime cattle are a smaller percentage of animals which appear superior in quality. They are normally from a long line of beef cattle ancestry and have the details which suggest top quality meat.
Heifers are usually female cattle less than three years of age. Steers are likely males castrated before maturity, and a cow is a female which has given birth to one or more calves. There are other fine tuned labels such as stag, heiferette, or bull. Cattle less than a year old are calves. Yearlings are between one and two years of age. Over eighteen months old, and they are short-yearlings.
Key global cattle data may be found in the following charts:
*Data courtesy of USDA.gov
*Data courtesy of USDA.gov
[B]Key terms for cattle include:[/B]
Prime Beef - In the US, this is a grading term that is designated by the US Department of Agriculture. It refers to meat that has the highest qualities of marbling, and is young and tender, juicy and flavorful.
Feedlot - A feeding operation where cattle or other livestock are 'finished' before slaughter. Normally, the animal feeding operation has entry-level weights for animals, anywhere from 650 to 850 pounds for feeder cattle.
Feeder cattle are destined for feedlots to be monitored and fattened for slaughter. Most feedlots will employ a nutritionist to determine the feed needs of the animals on the lot in an effort to produce the most desirable combinations of muscle and fat.
Meat from cattle will be graded according the the USDA standards, and will fall somewhere in the following ranges:
In addition to the following variables, if you are trading cattle, you will also want to be aware that the USDA issues reports that may impact the futures market including Cattle on Feed and Livestock Slaughter. These reports (and others) may be found in the economics and statistics sections of the USDA website. Feeder cattle auction summaries from various states may also be a valuable source of pricing information. Weekly summaries may be found here.
Possible Trends - Cattle population and the number of calves may impact prices and the time of year may also be perceived as important.
Import and Export - Restrictions and trade agreements can often impact the quantity of imports and exports to and from various countries.
Health Issues - Concerns over red meat consumption and possible links to colon cancer or saturated fat values are often weighed against beef as a rich source of linoleic acid and B vitamins. As health news comes and goes, domestic consumption or demand may be impacted.
Mad Cow Disease - Otherwise known as bovine spongiform encephalopathy, Mad Cow scares can wreak havoc on the cattle industry and breakouts can lead to massive slaughter and burn campaigns. Since the BSE prion cannot be destroyed by cooking, the panic of spread can easily affect both demand and supply of cattle.
Foot and Mouth Disease - The virus that causes FMD in livestock and other cloven-hoofed animals is highly contagious and causes blisters on soft tissue in the mouth and on the feet. Although it does not have an impact on human health, infections can have significant impact on the number of livestock.
Feed Costs - Higher feed costs can typically affect the weight and rate at which a farmer will take livestock to market. Since cattle are fed a combination of roughage, grain and protein supplements (soybean meal is a popular protein source), prices for corn, alfalfa, soybean, and even wheat can impact choice of feed and affect the feed-to-meat conversion - as well as the number of days on the feedlot.
Disclaimer: There is a substantial risk of loss in futures trading and it is not suitable for all investors. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some trading strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. Futures Press Inc., the publisher, and/or its affiliates, staff or anyone associated with Futures Press, Inc. or [url]www.learnaboutfutures.com[/url], do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (subscribers or otherwise). Past results are by no means indicative of potential future returns. Fundamental factors, seasonal and weather trends, and current events may have already been factored into the markets. Options DO NOT necessarily move lock step with the underlying futures contract. Information provided is compiled by sources believed to be reliable. Futures Press, Inc., and/or its principals, assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the expressed written consent of Futures Press, Inc. [more]