Eurodollars Investing Shocking Secrets

Eurodollars are the most popular futures trading contracts because they have reasonably low margin requirement and offer potential for a fairly good return in a short period of time. The best time to trade Eurodollars is when events are occurring that are most likely to influence the interest rates. If you can master trading Eurodollars, you can also easily trade other types of interest rate futures.

You will be wondering what a Eurodollar is. A Eurodollar is a dollar denominated deposit held in a non US Bank. A Eurodollar contract give you control over $1 million and is a reflection of three month LIBOR (London Interbank Offer Rate) rate on $1 million offshore deposit.

The margin requirements for these contracts are fairly low making them good instruments to trade even by small traders and ivnestors. Initial maintainance margin is something between $750 and $1,000 so with this small amount you can trade a regualar Eurodollar contract. These contracts get traded on the CME (Chicago Mercantile Exchange) and the expiration months are March, June, September and December. Either you settle them or you renew them, it is upto you at the expiry. These contracts can also be traded electronically at the GLOBX Electronic Platform making them highly attractive to the day traders.

Just like trading any other security when you trade these contracts, you need to keep an eye on the overall trend in the market, you need to know when the market is overbought and oversold plus before entering into a trade, you should be know how much you are willing to risk on that trade. So there is nothing special in trading theses contracts if you have the experience of trading other futures contracts.

Now,what is the best times to profit from trading Eurodollars. The best times are those when an interest rate change is expected in the near future. This can be close to the FOMC Meeting or even close to a scheduled G7 or G8 or even G20 meeting that is expected to make major decisions about the global finanical regulation. Eurodollars prices are quoted in terms of an index and are an important quote in the global business and finance.

When you trade futures, you talk of a tick. One tick is worth this much. In case of Eurodollars, 1 tick is equal to $25. So when you are trading them and the contract rises by 5 ticks, you make $125. In the same way, if the contract falls by 4 ticks, you lose $100. So, just like other futures contracts, you can make money or lose money pretty fast. These contracts are used to trade short term interest rates like the LIBOR in the international markets.

Eurodollars trade almost round the clock. So great gains from an intraday session can easily get wiped out or reduced significantly if some big event happens overnight. All futures contract that get traded on GLOBEX get affected in almost the same way. You can lose money trading Eurodollars just as you can when you trade other futures contracts. But first do paper trading to gain some experience!