Tick Size and tick value

Although I explain ticks in the free lecture, you have never actually needed to use ticks (and I never bother).
One tick is a movement of 0.01 in the futures price. The profit or loss for 1 tick movement of 1 contract is calculated in the normal way and is 0.01 x $1M (contract size) / 400 = $25.

To calculate the profit or loss in this example, you can show it in either of two ways. In the first bit of part (b) – using futures if interest rates increase by 0.5% to 3.8%.
The expected futures price is 96.02 (I assume you are happy calculating this).

Therefore the gain on the futures = (96.16 – 96.02) x 37 (contracts) x $1M (contract size) / 400 (because they are 3 months futures) = $12,950.

Alternatively, if you want to use ticks. The change in the futures price is 96.16 – 96.02 = 0.14 which is 14 ticks.
The gain is therefore 14 ticks x 37 (contracts) x $25 (tick value) = $12,950

It does not matter which way you do it (although it is important to understand the first way whether you do it that way or not, because you could be asked about it).

Because 1 tick is the smallest movement there can be, which is 0.01.

(You never actually need to use ticks in the exam, but they are explained in full in my free lectures).

🙂