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My textbook provides the following definition: A Eurodollar futures contract is traded on the Chicago Mercantile Exchange and: • Is a commitment to deliver a $1mm Eurodollar time deposit with a 3-month maturity;

I have a very basic question, which might seem too dummy-like but still: What should be the remaining maturity of the deposit to be delivered? Exactly 3 month remaining or it might be that I can deliver deposit which at the delivery moment will have 2 month and 27 days remaining, 2 months and 12 days, 1 month and 12 days, and so on, maybe even 1 day?

Also I was not able to find any detailed explanation about the meaning of being long/short in the Eurodollar Futures contract. If I enter into the long Eurodollar Futures position, as I understand, this means that I will have to buy deposit from someone with short position?

Could somebody please provide some source with this type of explanations, or just some detailed numerical example would help.

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I don’t know what text book you are reading, but a CME Eurodollar contract does not represent a commitment to enter into a time deposit. On the contrary , it is cash settled at maturity , using the published rate for 3month Libor. Usually, the contracts mature on the 3rd Wednesday of the month using the Libor setting on the prior Monday. The CME website has more details.

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  • $\begingroup$ On your second question, the person who is Long an ED future benefits from a reduction in the Libor rate between the time he enters the contract and maturity, the person who is Short the future benefits from an increase in Libor. (This is similar to how other fixed income instruments work). $\endgroup$ – noob2 May 2 at 22:08

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