quick question

Discussion in 'Financial Futures' started by humphrkf, Mar 21, 2007.

  1. humphrkf


    for a novice.. For something like Interest Rate Futures. Does the trading volumes and volatility of the future decline as it gets closer to the expiration date? Thanks for the help.
  2. fandyur


    In the eurodollars, the open interest drops of a couple days before expiration.
    Volatility might also drop off a couple days before also.
  3. "Interest rate futures" can mean a lot of things. Fed Funds, Eurodollars, Notes, Bills, Bonds, not to mention Bunds, Euroyen, etc.

    Eurodollars will reflect the fed target rate. As a result, the more fed meetings between now and the expiration of the contract, the more chances the target rate will change. In addition, there's a certain amount of "long tail" behavior that goes on--if you expect the fed to raise rates 25bp in the next 3 months, isn't it somewhat likely they'll raise 75bp in the next 12? Now imagine if the fed gave signals that they were going to lower rates--the short expiration might move 50bp down while the long expiration might move 150bp down.
  4. fandyur


    Dear Fully:
    You certainly picked a good name for yourself.