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Hi,
I am little bit confused with ticks. I understand tick size and that it is smallest movement of future price.
As it is in lection – if contract size is USD 62 500 and tick size is 0,0001 than tick value is 62 500 * 0,0001 = USD 6,25. But what is confusing are some questions in Revision kit BPP eg. 51 Alecto (2013 pilot paper). It is given that: Three mont euro future, EUR 1 000 000 contract, tick size 0,01% and tick value 25 EUR.But it does not make sense, if I calculate backwards 25 EUR/ 0,01% = the result is 2 500 EUR and not EUR 1 000 000 as given. Is this because of 400 think? So Alecto is interest future/option and in the lecture it was currency option?
Your help is really appreciated. Monika
You are confusing foreign exchange futures with interest rate futures.
Your first example is for foreign exchange futures.
For interest rate futures 1 tick is 0.01% and we calculate it for three months. So the tick size is 0.01/100 x 1,000,000 x 1/4 = 25.
I do explain all this in my free lectures (and also the fact that you never actually need to use ticks in the exam anyway).
Hi John
Please can i confirm something? You say that we don’t need to use ticks in the exam – but surely if an interest rates futures question comes up, we will need to know/work out the tick size? Would be great if you could confirm..
Thank you!
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