Eurodollar Futures Contracts

P

PSeeballack

Hi everyone

I am looking at Eurodollar Futures contracts and was wondering how to build series ED1 up to say ED20.
Let's assume I have data from 01-01-2004.

My understanding is that:

1. ED1 - perpetual front-month contract; i.e. I rollover March, June, September and December contracts
2. ED2 - means it is 2 quarters out; thus I am assuming I roll-over June to December contracts
3. ED 4- that would a be contract that is 4 quarters out; i.e. roll-over December contracts

What about ED3, ED5 etc?

I mean ED3 is a contract that expires in 9-months and ED5 would be expiring in 15-months. How do I build these series?

I am sorry if I sound stupid but I'm fairly new to these definitions of ED1...ED20 etc. I want to build a series so I can test some financial models I am working on.

Thanks for any help provided.

PS
I am a fairly new academic...n not into trading!
 
ED1 is a notification for the front month contract. So assuming a simple scenario where there are only 4 expiration months H (march), M (june), U (september) and Z (december), as long as H is the first contract to expire (depends on the underlying, but lets assume around mid march) this contract (H) is ED1. After the H expiration, the M contract becomes the first to expire, making this ED1 until we roll into the U contract etc. In other words, if you have 'longer term' ED1 data, you are already looking at a 'constructed' series (continuous data).

The same goes for ED2, which is always the 2nd next contract to expire etc.

Note, when looking at continuous data it is important to understand how / when the contracts are rolled to create the continuous contract and how historical contracts are adjusted.

I hope this clarifies.
 
For long term I never use front contract, am using Sept and Dec 2019. As for spreading uses just about anything of next several years. Front month moves less than others for me. Good volume for selling options.
 
Thanks for replying so quickly guys. I really appreciate it.

Let me summarize your explanation and see if I get it right.

1. ED1 - EDH04 should roll-over to EDM04 then EDU04 and finally EDZ04. This means that the maturity of each contract is approximately 91 days or 1 quarter out

2. ED2 - Start with EDM04 rollover to EDZ04 roll-over to EDM05....and goes on to construct a series of contracts that are all 2 quarters out.

3. ED3 - Start with EDU04 then rollover to EDM05 then to EDM06...and goes on to construct a series of contracts that are all 3 quarters out.

Am I right?
 
Handle123 said:
For long term I never use front contract, am using Sept and Dec 2019. As for spreading uses just about anything of next several years. Front month moves less than others for me. Good volume for selling options.
More...
When you do spreads, what are you betting on?
 
PSeeballack said:
Thanks for replying so quickly guys. I really appreciate it.

Let me summarize your explanation and see if I get it right.

1. ED1 - EDH04 should roll-over to EDM04 then EDU04 and finally EDZ04. This means that the maturity of each contract is approximately 91 days or 1 quarter out

2. ED2 - Start with EDM04 rollover to EDZ04 roll-over to EDM05....and goes on to construct a series of contracts that are all 2 quarters out.

3. ED3 - Start with EDU04 then rollover to EDM05 then to EDM06...and goes on to construct a series of contracts that are all 3 quarters out.

Am I right?
More...

No, ED2 always refers to the second contract. So in the above example, when EDM04 is the current front month (ED1), than EDU04 is ED2. When EDM04 expires, EDU04 becomes ED1 and EDZ04 becomes ED2. Folowing the next expiration, EDZ04 will become ED1 and EDH05 will be ED2.

At any point in time, ED1 or ED2 etc. point at the CURRENT first and second contract to mature.
 
Ok. Let's assume it is 01-01-2004.

The first contract to expire is EDH04. I roll-over to the next contract to expire EDM05...and so on. This is ED1.

We r still 01-01-2004. Now we have EDH04 and EDM04. If start with EDM04, which is the second contract to expire, and roll-over to the next 2nd contract to expire, i.e. EDZ04. This is ED2, right?

Same logic...01-01-2004. I start with EDU04 then roll to the 3rd next contract to expire i.e. EDM05 thats ED3.

I am getting super confused....I am sorry if I sound annoying to anyone
 
It's simple. Take the current futures strip, the first one is ES1, second one is ED2 etc. Once the current first futures expires, the second futures will become the first one, third futures become second etc.
 
PSeeballack said:
Ok. Let's assume it is 01-01-2004.

The first contract to expire is EDH04. I roll-over to the next contract to expire EDM05...and so on. This is ED1.

We r still 01-01-2004. Now we have EDH04 and EDM04. If start with EDM04, which is the second contract to expire, and roll-over to the next 2nd contract to expire, i.e. EDZ04. This is ED2, right?

Same logic...01-01-2004. I start with EDU04 then roll to the 3rd next contract to expire i.e. EDM05 thats ED3.

I am getting super confused....I am sorry if I sound annoying to anyone
More...

I'm going to have one last try at this - It's really not that difficult :)

On 1-1-2004, the first contract to expire is EDH4 (for simplicity sake, let's assume there are only 4 expirations in H,M,U and Z). This is ED1. The second contract to expire is EDM4, which is ED2, the 3rd to expire is EDU4, which can also be referred to as ED3.

Fast forward 3 months (1-04-2004). EDH4 has expired, so now EDM4 is the first contract to expire, i.e. this can now be referred to as ED1. EDU4 is now the 2nd contract to expire and therefore ED2 while EDZ4 can be referred to as ED3.

Fast forward another 3 months (1-07-2004). EDM4 has also expired by now. The first contract to expire is EDU4, which can therefore now be referred to as ED1 while EDZ4 can be referred to as ED2.

You should understand that ED1, ED2 etc are NOT contracts themselves. They are simply a naming convention to reference or in other words, they POINT at a contract (ED1 always POINTS AT the first contract to expire, ED2 always POINTS AT the first contract to expire.)

I hope it is clear now.
 
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