Any Eurodollar Traders here? I've got an implieds question

[MCT]

Hey guys,

I just started trading Eurodollars a few months ago, so i'm new to the game still, but i've definitely been enjoying it so far. I found this site and was hoping to get a conversation going with other eurodollar traders.

I had a question regarding implieds that I can't seem to figure out. In the outrights implieds appear to be based off immediate execution, however in any of the spread prices that i have seen, implieds are created both based on immediate execution to create a greater spread, but also I've seen them created with adjacent prices that are not available for immediate execution.

For Example.

H2016-M2016 ask is 21.0 with askqty of 577
M2016-U2016 Bid is 22.0 with bidqty of 30

So then

H2016-M2016-U2016 ask is -1.0 and has an implied value of 30 on the offer.

I understand the concept with immediate execution but I'm not understanding implieds with diagonally adjacent prices.

 

[H2O]

Hey guys,

I just started trading Eurodollars a few months ago, so i'm new to the game still, but i've definitely been enjoying it so far. I found this site and was hoping to get a conversation going with other eurodollar traders.

I had a question regarding implieds that I can't seem to figure out. In the outrights implieds appear to be based off immediate execution, however in any of the spread prices that i have seen, implieds are created both based on immediate execution to create a greater spread, but also I've seen them created with adjacent prices that are not available for immediate execution.

For Example.

H2016-M2016 ask is 21.0 with askqty of 577
M2016-U2016 Bid is 22.0 with bidqty of 30

So then

H2016-M2016-U2016 ask is -1.0 and has an implied value of 30 on the offer.

I understand the concept with immediate execution but I'm not understanding implieds with diagonally adjacent prices.

Been a while since I traded STIRS, but I think you may be talking about implieds from implieds, which you can turn on/off depending on your software.. (i.e. implied prices / volumes are calculated using implies prices / volumes in the underlying contracts). To find out more, read up on implied-in vs. implied out.

It could also be that you're talking about the following:

Assume MU16 is bid 22.0 for 10 contracts (either direct or implied), but additional size is available at 22.0 (or potentially even better) by working the matrix.
Example:

MZ16 is offered 43.5 for 20 lots, and UZ16 is bid 21.5 for 300 lots. You can lift MZ and hit UZ (both for 20 lots) and you have just bought 20 lots of MU at 22.0 (+ additional comms)

Therefore the total size really available in MU is 30 lots (10 as shown) + an additional 20 by working the matrix.

Of course the above is a very simple example, which can be extended upon. Note that you really need rock-bottom commissions (prop) to make this interesting from a cost point of view, especially when taking into account that you may at times miss your second / third leg..

 

[MCT]

Been a while since I traded STIRS, but I think you may be talking about implieds from implieds, which you can turn on/off depending on your software.. (i.e. implied prices / volumes are calculated using implies prices / volumes in the underlying contracts). To find out more, read up on implied-in vs. implied out.

It could also be that you're talking about the following:

Assume MU16 is bid 22.0 for 10 contracts (either direct or implied), but additional size is available at 22.0 (or potentially even better) by working the matrix.
Example:

MZ16 is offered 43.5 for 20 lots, and UZ16 is bid 21.5 for 300 lots. You can lift MZ and hit UZ (both for 20 lots) and you have just bought 20 lots of MU at 22.0 (+ additional comms)

Therefore the total size really available in MU is 30 lots (10 as shown) + an additional 20 by working the matrix.

Of course the above is a very simple example, which can be extended upon. Note that you really need rock-bottom commissions (prop) to make this interesting from a cost point of view, especially when taking into account that you may at times miss your second / third leg..

Thanks for your help H20, I found this article based on what you told me to search which seems to explain well the instant execution side of implieds https://www.cmegroup.com/trading/interest-rates/files/Butterflies.pdf


And I understand your example of basically cutting up a 6 month into 3 months, but that is not exactly what i am seeing. In your example you can again perform instant execution on both the MZ offer and UZ bid and you instantly are long a bid from the price you want.

In my example you are looking at two prices, one a bid and one an offer, the lesser of these spreads creates an implied value on the secondary spread.

For Example.

MU16 is bid @ 21.0 10 times, HM16 is offered @ 22.0 40 times. HMU has an implied ask qty of 10.

Now lets say that you placed a bid down on the MU bid, you get filled, but now you still have to place an offer on the HM offer and get filled. There is no instant execution or capability, so i don't understand why there are implieds there.


In the traditional instant execution example.
MU16 would be offered @ 21 10 times, and HM16 would be offered @22.0 40 times with an implied value of 10 coming from MU16, letting you know that there is a market on the HM16 to execute on MU16 to immediately leg the HMU offer of 1.0

I hope I'm coming across a bit clearer now. You seem like the kind of guy who would know the answer to this question, but i'm not sure I am asking the correct question.

 

[MCT]

Here's an illustration to see if it helps to better illustrate my question.

 

[H2O]

Hi,

First of all you have to understand implied orders are not created for you to leg into spreads or flies. They are created to facility faster / more efficient order book clearing for the CME.

To complete your sentence, 50 of the HMU 1's exist solely because if a buyer comes in to lift the fly, CME will match this buyer by filling 50 lots of the offer of HM and the 50 lots on the bid in MU.

Think about it... as per your example, you can buy the fly in 2 ways:
1) buy HMU at 1.0
2) Buy HM at 22.0 and sell MU at 21.0, resulting in being long HMU at 1.0

If you would execute option 2 for 50 lots, the CME will straight away cancel the implied offer on the fly as there is no more size to match on the bid side of the MU spread.

The 50 lot implied offer is an example of an implied-in order created by CME (see the document you referred to).

Hope this helps

 

[MCT]

Hi,

First of all you have to understand implied orders are not created for you to leg into spreads or flies. They are created to facility faster / more efficient order book clearing for the CME.

To complete your sentence, 50 of the HMU 1's exist solely because if a buyer comes in to lift the fly, CME will match this buyer by filling 50 lots of the offer of HM and the 50 lots on the bid in MU.

Think about it... as per your example, you can buy the fly in 2 ways:
1) buy HMU at 1.0
2) Buy HM at 22.0 and sell MU at 21.0, resulting in being long HMU at 1.0

If you would execute option 2 for 50 lots, the CME will straight away cancel the implied offer on the fly as there is no more size to match on the bid side of the MU spread.

The 50 lot implied offer is an example of an implied-in order created by CME (see the document you referred to).

Hope this helps

That clears it up slightly for me, but then I would ask why would MU not be implied on the offer, only on the bid. This type of implied I only see when the two prices for the fly are diagonal to eachother, one bid and one offer. Because if it was as you explain then lets say 21 went offer, wouldn't there have to be a 50 lot implied offer on them still?

 

[H2O]

Rather than going through the mechanics of implied pricing here, I suggest you read

STIR Futures: Trading Euribor and Eurodollar futures (Steven Aikin)

He does a pretty good job explaining it.

 

[MCT]

Rather than going through the mechanics of implied pricing here, I suggest you read

STIR Futures: Trading Euribor and Eurodollar futures (Steven Aikin)

He does a pretty good job explaining it.

Ordered! thanks for the help.

So you mentioned you havent traded STIRS in a while, what are you trading these days, and why did you move away from STIRS?

I saw that book had a section on fixed and variable costs which i was pretty interested in, I've been wondering what most people pay per contract.

 

[H2O]

Ordered! thanks for the help.

So you mentioned you havent traded STIRS in a while, what are you trading these days, and why did you move away from STIRS?

I saw that book had a section on fixed and variable costs which i was pretty interested in, I've been wondering what most people pay per contract.

I was at a prop firm when I was trading STIRS, which brings me straight away to your question on commissions. I would argue it is very difficult to trade STIRS as a retail trader (not talking about swing trading). Legging in / out in order to build and defend positions means you need rock bottom commissions to come out positive.
(As an indication, from memory only, I was paying sub £0.70rt doing up to ~50k rt/month).

Why did I move away: market conditions continue to push risk/reward up and ZIRP certainly doesn't help.

What am I trading now: For my private account I still trade spreads, but much longer term and mainly other markets (commodities, indices, bonds). In fact I rarely trade STIR spreads at the moment for the reasons outlined above.

 

[MCT]

I was at a prop firm when I was trading STIRS, which brings me straight away to your question on commissions. I would argue it is very difficult to trade STIRS as a retail trader (not talking about swing trading). Legging in / out in order to build and defend positions means you need rock bottom commissions to come out positive.
(As an indication, from memory only, I was paying sub £0.70rt doing up to ~50k rt/month).

Why did I move away: market conditions continue to push risk/reward up and ZIRP certainly doesn't help.

What am I trading now: For my private account I still trade spreads, but much longer term and mainly other markets (commodities, indices, bonds). In fact I rarely trade STIR spreads at the moment for the reasons outlined above.

I'm new to a few of the terms you are using but i am assuming rt= retail trade? I'm not sure what the pound was at back then, but right now thats over $1USD per contract...thats crazy.

What is it about ZIRP that makes it harder to trade? is it a lack of liquidity, or flow through, as in its tough to get your moneys worth on a trade without a substantial movement? Like I mentioned I'm extremely new to this but from what I hear from guys who have been trading eurodollars for the past 5-10 years, they say the market is tough right now. But I feel like the market will always be tough in the present and the past will always be easier, because its a challenge that you have already surpassed