# Calculating PnL on Eurodollar futures trading

I'm trying to understand how the published prices for futures relate to how much is actually spent when you execute. For example: looking at GEH8 on 4/19/2017.

The quotes look like 98.50, 98.515, but I believe that there is a display factor of .0001.

My question is: if you execute 250 contracts at \$91.51, and it closes at \$91.505, what is the unrealized PnL?

First, I would say that it is realized PnL because with futures, you always have to settle up at the end of the day in the margin accounts. If you bought the futures at 98.51, then you only post margin since the futures contract has zero value. If the contract settled at 98.505, then you lost 0.005 on the contract. Each Eurodollar contract is on 1MM notional, but over the 3M period, it is like a 250K notional. The payoff is 2,500 per point per contract, so you have a final payoff of 250 * 2,500 * (-0.005) = -250 * 12.50 = -3,125. The 250 factor is the number of contract you referenced in your question.

It is worthwhile to think of a futures contract as a series of one day forward contracts that get settled up each day in your margin account and you have the option of exiting at anytime. This way of thinking can help to understand an important feature of the Eurodollar contracts - i.e. the convexity correction that helps to convert futures prices to forward prices and vice versa. This is a feature of any futures contract, but is most pronounced and studied for Eurodollar contracts since they have expiries out to 10 years and the convexity correction is bigger for longer dated contracts.

• institute.cmegroup.com/products/GE – amdopt May 23 '17 at 15:53
• Question for you then, if you were trying to create a structure for calculating P&L for a set of multi instrument trades what factors do you need to know about each instrument to get the calculations correct? For instance, for equity options, the multiplier is 100 (for the most part), because the price of a contract needs to be multiplied by 100 to come up with the cost of the trade. – bpeikes May 23 '17 at 18:46
• @bpeikes - this multiplier is very contract dependent. For my personal analytics, I keep everything in a CSV (though admittedly, a database would be better since my system is pretty mature and the schema I would use is clear now) - for each instrument in my CSV, I have a row that indicates the multiplier to use and my system keeps this "static data" in memory for easy look up every time it is needed. The multipliers I get from BBG. This static data csv is a real value add for me - it contains all rules to construct equities, fx, IR swaps objects etc seamlessly and quickly. – FinanceGuyThatCantCode May 23 '17 at 18:51
• Thanks. I was wondering if the multiplier had a name? For instance, if I was using a feed which was supposed to give me that information, what might the field name be called? – bpeikes May 24 '17 at 22:43

This document may be helpful Understanding Eurodollar futures

The value of a 1 point price change (for example from 98 to 99) is equal to 2500 USD per contract (this is $1000000\frac{90}{360}1\%$ since the nominal amount for the loan is one million and interest is paid every 3 month on 30/360 convention). Equivalently the value of a 1 bp change (from 98 to 98.01) is 25 USD.

In general for any futures contract once you know the "value of 1 point" on one contract you can calculate the P&L as Value_of_1_point*Price_Change_in_points*Contracts .

• Is there a name for the factor which tells you to multiply contract count, by 25? I know the display factor for the contract is .0001, but I'm not sure what the other factor would be called. – bpeikes May 24 '17 at 22:54

That’s a one basis point move. Which implies a P/L of +25/-25 depending on your position. In the example you have provided if you were to SELL 250 contracts, then each 0.01 DROP in the \$-price would imply a +\$25 PER CONTRACT to your account. If you were to BUY 250 contracts, it would be the opposite: Each \$0.01 INCREASE in the \$-price would imply +\$25: $$1.000.000\ \cdot \frac{90}{360} \cdot 0.0001= \25$$ per contract and finally $$\25 \cdot 250 = \6.250$$. • Isnt it a 0.5 basis point move? ie from 91.51 to 91.505? – bpeikes Dec 5 '18 at 4:49 • Correct. So if each$0.01 change in the price in either direction (+/-) would imply a $25 gain depending on the contract being buy/sell. So a half of a basis point move would imply a$12.5 p/l each contract. – MBfinance Dec 7 '18 at 5:58