Characteristics of Different Types of Futures Contracts
In this article, we will discuss the characteristics and conventions for different types of futures contracts.
T-bill Futures Contracts
- Face value: $1 million
- Underlying asset: 90-day T-bills
- Quotation: 100 minus annualized discount rate
- Settlement: Settled in cash
Eurodollar Futures
- Face value: $1 million
- Underlying: 90-day LIBOR (add-on yield)
- Quotation: 100 minus annualized LIBOR(%)
- Settlement: Settled in cash
- Minimum price change: 1 tick ($25 per $1 million contract)
In Eurodollar futures, the long gains when interest rates decline, and vice verse.
Treasury Bond Futures
- Face value: $100,000
- Underlying: Treasury bonds with maturity greater than 15 years
- Quotation: Quoted as percent and fraction of 1% (1/32) of face value
- Settlement: Deliverable contracts
The short can deliver from many bonds that meet the delivery terms. Generally, the cheapest-to-deliver bond will be delivered.
Stock Index Futures
- Face value: 250 times the level of index
- Underlying: Stock index
- Quotation: Index value
- Settlement: Cash settlement (in multiples of 250)
- Gain/loss: Each index point represents a gain/loss of $250 per contract
The above figures assume the example of S&P 500 Index Futures.
Currency Futures
- Face value: Depends on the currency (A euro contract is on EUR 125,000). This is in the US with USD as the domestic currency.
- Settlement: Delivery
- Gain/Loss: A change of 0.0001 USD translates to $12.50 on a Euro contract.