Poor man way to go long eurodollar?

Daal · May 10, 2007

Contracts are a little too big for me, is there an alternative to it?Like some kind of ETF or libor emini or something(it can be outside the US)

MGJ · May 10, 2007

Perhaps the BAX. The Canadian Banker's Acceptances traded on the Montreal Exchange. Compare the specs,

http://www.m-x.ca/produits_taux_int_bax_en.php
http://www.cme.com/trading/prd/ir/eurodollar_FCS.html

Over tha past 1.5 years, BAX's high was 96.25 and the low was 95.32, a range of 0.93 points. At 2500 CAD per point, that's 2300 CAD per contract. About US$ 2120.

Here's a chart of the nearest futures contracts. Discontinuities occur at roll times (early March, June, Sept, Dec)

Daal · May 10, 2007

Quote from MGJ:

Perhaps the BAX. The Canadian Banker's Acceptances traded on the Montreal Exchange. Compare the specs,

It seems decent but I dont believe it would give me exposure to profit from a easing cycle in the US.

FullyArticulate · May 10, 2007

Quote from Daal:

It seems decent but I dont believe it would give me exposure to profit from a easing cycle in the US.

Never mind I think an easing cycle is insane, but there are many ways to play Eurodollars with lower risk. :-)

Look at mid-curve options, for example. You could buy a EDZ8 1-year mid-curve call. It will expire this December on next December's contract.

Mini Eurodollars also exist. They are primarily used for building strips, but they may have reasonable liquidity.

Pa(b)st Prime · May 10, 2007

ED is the same size contract as BAX.

Thus if BAX isn't beyond your risk then why would ED be too big?

Of greater importance: I hope you realize that ED is already pricing in an anticipated easing schedule of about 75bp over the next year.

Unless you think rates are going way lower, there's no play........

rayl · May 10, 2007

FXE ETF if you are OK with zero leverage?

http://www.currencyshares.com/products/fxe.rails

FullyArticulate · May 10, 2007

Quote from rayl:

FXE ETF if you are OK with zero leverage?

That's the Euro (the currency), not Eurodollars (the fixed income deposit).

Daal · May 10, 2007

Quote from Pa(b)st Prime:

Of greater importance: I hope you realize that ED is already pricing in an anticipated easing schedule of about 75bp over the next year.

I know,but all kinds of short-term market insanities can create an opportunity. plus is always good to know
Options I'm not sure, you probably overpay so much for the move that leaves you little margin to be wrong.

Bernard111 · May 14, 2007

Quote from Pa(b)st Prime:

Of greater importance: I hope you realize that ED is already pricing in an anticipated easing schedule of about 75bp over the next year.

Unless you think rates are going way lower, there's no play........

A beginner question: which data and calculation do I need to extract those 75 bps probability of Fed of rates cuts on ED, from the current ED prices?

Pa(b)st Prime · May 14, 2007

Quote from Bernard111:

A beginner question: which data and calculation do I need to extract those 75 bps probability of Fed of rates cuts on ED, from the current ED prices?

ED is the 3 month LIBOR rate. LIBOR is what would commonly be referred to as a bank's CD rate.

Subtracting an ED futures from 100 equals the 3 month rate forward from that particular month. For example if June 2007 ED futures are trading at a price of 94.65 then the 3 month rate is 100-94.65=5.15%

If Dec/08 ED futs are 95.25 then there's an implied 4.75% rate on 3 month money lent to banks for a term between 12/08 to 3/09.