Customer Service
info@cmegroup.com
800-331-3332 or 312-930-2316
Eurodollar Calendar Spread Options (CSOs) are a new tool for expressing views on the shape of the yield curve. As an extension of the CME Group benchmark interest rate products, Eurodollar CSOs complement the existing suite of Eurodollar futures and options, offering expanded flexibility and trading opportunities.
CSO call options are exercisable into one long nearby Eurodollar futures contract and one short deferred Eurodollar futures contract; for example, long September 2008 ED futures and a short September 2009 ED futures.
CSO put options are exercisable into a short nearby Eurodollars futures contract and a long deferred Eurodollar futures contract.
Eurodollar CSOs:
- Allow more efficient management of risk exposures specifically tied to the slope of the Eurodollar rate curve, enabling trading on the curve’s direction as well as its volatility
- Provide a new alternative to taking a position on the flattening or steepening of the yield curve
- Offer a means to spread curve volatility against outright futures volatility, complementing the popular “conditional curve” trade where options are traded on the legs of the individual underlying futures contract
About the Contracts
- Underlying is the one-year Eurodollar futures calendar spread, such as Sep08-Sep09, Dec08-Dec09, and so on
- Exercisable into a position in the underlying Eurodollar futures calendar spread at a differential equal to the strike price
- Available to trade both via open outcry and electronically
Uses
- Take a position on the direction and volatility of the one-year LIBOR spread
- Manage risk exposures tied to the LIBOR curve
- Hedge against adverse price movements in the one-year Eurodollar futures calendar spread
- Arbitrage and spread against the conditional curve trade
Eurodollar Calendar Spread Options Fact Card
Eurodollar Calendar Spread Options Contract Specifications
|
Description
|
Eurodollar Calendar Spread Options (CSO) are option contracts on the one-year Eurodollar futures calendar spread (i.e., "Whites" versus "Reds" futures spread).
|
|
Underlying Contracts
|
An ED CSO call option is exercisable into one (1) long nearby Eurodollar futures contract and one (1) short deferred Eurodollar futures contract (e.g., long September 2008 and short September 2009 Eurodollar futures). An ED CSO put option is exercisable into one (1) short nearby Eurodollar futures contract and one (1) long deferred Eurodollar futures contract (e.g., short September 2008 and long September 2009 Eurodollar futures). For quarterly CSOs, the nearby futures shall be the quarterly futures with the same expiration month as the option (e.g., September 2008 options shall be exercisable into the EDU8-EDU9 spread). For non-quarterly CSOs, the nearby futures shall be the nearest quarterly futures following the expiration of the calendar spread options (e.g., October and November 2008 options shall be exercisable into the EDZ8-EDZ9 spread).
|
|
Listing Cycle
|
Two serials plus four consecutive expiries in the March, June, September, and December quarterly cycle.
|
|
Price Quote
|
IMM index points. Each 0.01 (one basis point) equals $25.
|
|
Minimum Price Fluctuation (Tick Size)
|
0.005 IMM index points (one-half of one basis point), or $12.50. For options with premiums below 0.05 IMM index points (5 ticks), minimum increment is 0.0025 IMM index points (one-quarter of one basis point), or $6.25. When the underlying nearby futures is trading in quarter-basis point increments, the ECS Option shall also trade in quarter-basis point increments.
|
|
Strike Prices
|
At-the-money strike price plus/minus 20 strike prices in integral increments of five basis points (0.05 IMM index points).
|
|
Last Trading Day
|
ED CSOs cease trading at the close of business on the Friday prior to the third Wednesday of the contract month.
|
|
Exercise
|
In-the-money ED CSOs shall settle by exercising into the underlying Eurodollar futures spread at the price differential determined by the option strike. For example, a CSO call option with a strike price of .75 exercises into a long nearby ED futures and a short deferred ED futures at a price .75 lower than that of the nearby futures. For a CSO put option with a strike price of .75, the option exercises into a short nearby ED futures and a long deferred ED futures at a price .75 lower than that of the nearby futures.
|
|
Trading Hours
|
Open Outcry: 7:20 am - 2:00 pm, CT, Monday - Friday
CME Globex Electronic Markets: 5:00 pm - 4:00 pm, CT, Sunday – Friday |
|
Ticker Symbols
|
Open Outcry: SP1
CME Globex: SP0
Bloomberg: EA < comdty > |
Eurodollar Calendar Spread Options Final Settlement Example (PDF)
