0
$\begingroup$

I am trying to understand how to calculate point value for each live cattle futures contract by looking at the contract's spec on CME website.

I understand that 0.00025 * 40,000 = $10 which is tick value or in other words dollar amount of minimum fluctuation. However, I do not understand how can I find, how many ticks are in a point?

When I used CME simulator, the info displayed matches my understanding. As you can see, tick size is 0.025 which is 1/40 of a point so $10 * 40 gives us $400 which is dollar equivalent of a point value. If we multiply that with price, we get notional value of the contract.

Now my question is, how could I figure out from the contract specs? I am able to do this for most of the contracts especially index futures but not some agricultural ones.

Thank you for your help!

 # Live Cattle                                                    
 LEQ1                                                             
 Contract Size: 40000.0                                           
 Tick Size: 0.025                                                 
 Tick Value: $10 (1 points has 40 ticks, so 1 point is 400)       
 Last Price: $121.850                                             
 Notional Value of Order: $48,740.00 ( = 121.850 * 400)           
 Margin committed to trade: $1,760.00                             
                                                                  
 Side: BUY                                                        
 Qty: 1                                                           
 Type: LMT                                                        
 Limit Price: 121.85                                              
 TIF: DAY                                                         

https://www.cmegroup.com/trading/agricultural/livestock/live-cattle_contract_specifications.html

enter image description here

$\endgroup$
3
  • $\begingroup$ @noob2 That makes sense. Thank you! Tick Size: 0.025. I think it is clear now. 1 point in dollar is $400 and 1 tick in dollar is $10 so there are 40 ticks in point which makes tick size to be 0.025. $\endgroup$ Jun 19 at 9:40
  • $\begingroup$ @noob2 Why 0.00025 per pound = $10.00 ? I see that it is 40,000 * 0.00025 but isn't 0.00025 cents per pound so it should be actually $0.01. The formula only works if I assume they quoted minimum quotation in dollars. $\endgroup$ Jun 19 at 10:03
  • $\begingroup$ Appreciate your input. I can accept your answer if you post it. PS: I am very pedantic when it comes to calc because these stuff is not clearly explained anywhere. I find some info but they do mumbo-jumbo and present results which is very confusing unless they clearly show the unit of calculations. $\endgroup$ Jun 20 at 19:27
2
$\begingroup$

One contract is for 40000 pounds of weight, the price is in US cents per pound so when price increases by "one" say from 100 to 101 (i.e. one cent of a USD increase in price per pound) you make 0.01*40000 = 400 dollars.

Why 0.00025 per pound = \$10.00. They should have said 0.00025 $ per pound, to be clear, then 0.00025*40000 = 10 dollars.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.