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Information > Financial Terms > This page Commercial Paper Futures The
commercial paper futures contract on the CHICAGO BOARD OF TRADE calls
for delivery of prime commercial paper rated A-1 by Standard & Poor's
Corporation and P-1 by Moody's Investors Service, Inc. and approved as
deliverable by the Chicago Board of Trade, maEagle Tradersg not more than
90 days from the date of delivery. The
basic unit of trading for commercial paper futures is commercial paper
with a stated face value of $1 million (or multiples thereof). Prices
are quoted as an annualized discount.
Minimum price fluctuations are 0.01%, also known as one basis point,
which is $25 per contract (minimum price fluctuations are calculated on
the basis of 0.01% of $1 million - $100 then is divided by four because
prices are quoted on a 90-day basis, rather than 360-day). Normal
daily limits on price fluctuations are 0.25% (25 basis points of $625
per contract) above and below the previous day's settlement price.
Price limits do not apply to trading in contracts for delivery
during a specific month on or after the last business day of the preceding
month. In
all other futures contracts traded on the exchange the long is the taker
of delivery and the short is the deliverer of the commodity; this is reversed
in commercial paper futures. Long
is defined as the commitment to deliver paper and short as the commitment
to take delivery. In other
words, the short commits to deliver the loan; the long commits to pay
in commercial paper. This
allows the long to make money when the price goes up and the short to
make money when the price goes down, just as in other commodity markets. BIBLIOGRAPHY ANREDER,
S.S. "Ballooning Debt: Month
by Month, Commercial Paper Soars to New Highs."
Barron's, |