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There is a sentence in the question that confuses me.
“Three month Euro futures 1000000 euros contract, tick size 0.01% and tick value 25 euros.”Because tick value= size of future contract * tick size
the size of future contract=25/0.01%=250000
This is different from 1000000 in the question. Why?But for interest rate futures, tick value does not equal size of futures contract * tick size!
We always divide by 4 because they are always 3 months futures (and there are four 3-months in a year).
The free lectures on interest rate risk will help you.
So in Alecto co, future p/s= tick value*tick number*number of contract
But in Phobos Co 12/08, future profit or loss=tick size*tick number*number of contract. This also the formular used in many othet questions.
Please explain 🙂
Both questions have calculated it in exactly the same way!!
You never actually need to use ticks (as I explain in the lecture. I never bother with ticks at all!).
If you want to use ticks, then the gain or loss is always: number of contracts x number of ticks movements x the value of one tick.
That is what they have done in both questions.You asked before how the value of a 1 tick movement is calculated, and as I explained it is calculated (for interest rate futures) as: 0.01% x contract size divided by 4.
I really do suggest that you watch the lectures on interest rate futures.
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