hoangvu90

Allow me to elaborate on Euro dollar futures contract.
Eurodollar rates are the interest rates at which US dollars are borrowed and lent outside US.
If you have gone long in Eurodollar futures at 95, you have agreed to lend the money at 5% (100 minus 95) in future. You have locked yourself to earning 5% in future.
Subsequently, if the euro dollar interest rate goes down to 4.99%, the new quote will be 95.01 and the person holding long position has gained because she has locked herself into lending at 5% while the market rate is only 4.99%.
In fact, for every move down of one basis point (5% to 4.99% is a move of 1 basis point), $25 is deposited into futures account of the person who went long.
This is assuming that you have entered into 90 day futures contract for a notional principal of $1 million.
The calculation is as follows.
1 million * (0.01/100) * (90/360).
If the interest goes up to 5.01%, then the long position will have to pay $25.