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STIR Futures

Trading Euribor and Eurodollar futures

By Stephen Aikin

Paperback £55.00 / $85.00
eBook £48.99 / $57.99
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STIR Futures

Trading Euribor and Eurodollar futures

By Stephen Aikin

Jacket text

Short-term interest rate futures (STIR futures) are one of the largest and most liquid financial markets in the world. The two main exchange-traded contracts, the Eurodollar and Euribor, regularly trade in excess of one trillion notional dollars and euros of US and European interest rates each day.

STIR futures have some very unique characteristics, not found in most other financial products. Their structure makes them very suitable for spread and strategy trading and relative value trading against other instruments such as bonds and swaps.

STIR Futures is a handbook for the STIR futures market. It clearly explains what they are, how they can be traded, and where the profit opportunities are. The book has been written for both aspiring and experienced traders looking for a trading niche in a computerised marketplace, where all participants trade on equal terms and prices.

This fully revised and updated second edition now includes:

– Details on the effects of the financial crisis on STIR futures pricing and trading.
– An in-depth analysis of valuation issues, especially the effects of term and currency basis when relatively traded to other financial products.
– A new section on using STIR futures to hedge borrowing liabilities.
– An in-depth analysis of relative value trades against bond and swap derivatives.
– Trading synthetic FX swaps using STIR futures.

Plus updated case studies and examples throughout and an even better explanation of the basics.

This book offers a unique look at a significant but often overlooked financial instrument. By focusing exclusively on this market, the author provides a comprehensive guide to trading STIR futures. He covers key points such as how STIR futures are priced, the need to understand what is driving the markets and causing the price action, and provides in-depth detail and trading examples of the intra-contract spread and strategy markets and cross-market relative value trading opportunities.

An essential read for anyone involved in this market.

About the author

Stephen Aikin has over 20 years financial markets experience,mainly in derivatives. He started his career in 1985, working for Kleinwort Grieveson, Credit Suisse and SBCI, principally as an equity options specialist. In 1988, he founded a proprietary trading company, which became a regulated member of the NYSE Euronext-liffe derivatives exchange, and this company experienced consistent operation and profitability throughout its 20 year operation. The company specialised in relative value trading, exploiting the relationships between financial instruments, principally in the field of interest rates and energy derivatives.

Stephen switched from trading to derivatives training in 2007 after the publication of "Trading STIR Futures - An introduction to short term interest rate futures", a book which was bulk purchased by the NYSE Euronext-liffe exchange for their interest rate education program. It was well received in the trading community for its ability to convey complex material in an intuitive and non-academic way. Stephen has also written several articles for European and American magazines on credit spread and yield-curve capture trading strategies.

Stephen now works as a capital markets trainer, specialising in derivatives and delivers approximately 60 training days a year to leading Banks such as Barclays Capital, Goldman Sachs, HSBC, RBS and Calyon in London and New York. He is also a Fellow of the Securities & Investment Institute (FSI) and holds an MSc in Financial Markets and Derivatives.

Stephen runs a number of intensive financial courses for traders, banking professionals and risk managers. Details may be found at See also the STIR Futures Forum for questions, discussions and comments from the guru and other users.


“This book is a worthy successor to the well-received first edition. It is a good read, balanced to keep the layman interested enough to get a feel for what is involved in STIR trading and how this piece of the financial jigsaw fits in with other products. It also serves as a good reference book when required.”

– Jason Rolf, Fund Manager, Amati Global Investors


About the Author
- STIR Futures - Quick Summary

1. STIR Futures
Introduction to STIR Futures
- What are futures?
- What are STIR futures?
- Where and how are they traded
- Contract structure and general specifications
- Contract specifications for the Eurodollar contract
- Buying and selling STIR futures
- Buying and selling STIR futures as notional borrowings and lendings
- Introduction to spreads and strategies
- A typical trader's screen
- The advantages of trading STIR futures compared to other financial products

STIR Futures Pricing
- Spot and forward rates

STIR Futures Valuation
- Basic pricing concepts
- Valuing Euribor futures
- Advanced pricing concepts

Hedging with STIR futures
- A simple hedging example

The Drivers of STIR Futures Prices
- The changing shape of the futures curve
- The curve is constantly changing
- Liquidity considerations of the micro-curve
- Seasonal influences
- Price-sensitive effects
- Correlated markets
- Uncorrelated markets
- Event risk
- Systemic risk contagion


2. Mechanics of STIR Futures
Accessing the Markets
- Clearing and settlement
- Margin requirements
- Comparison of futures settlement with equities and CFDs

Fixed and variable costs
- Fixed costs
- Variable costs

Liquidity and rebate schemes
- STIR Liquidity Provider (LP)
- STIR Discount Schedule
- New Market Participants Scheme (NMP)
- International Incentive Program (EIP)
- New Trader Incentive Program (NTIP)

The choice of Clearing Member or Trading Arcade
- Customer classification
- Financial probity
- Financial protection
- Capital requirements and commissions
- Technological ability
- Trading arcades

Software and hardware
- Trading algorithms
- Implied pricing functionality
- Implied prices - traders' friend or foe?

Selecting an ISV
- Price displays
- Two or one-click dealing
- Risk management considerations

Influences Regarding the Trader's Choice of Markets and Contracts
- Domicile and time zones

Remote Trading
- Internet
- Virtual private network (VPN)
- Digital private circuit
- Connectivity speed

3. Trading STIR Futures
Trading Opportunities: The Two Trades
- Outright trading
- Spread trading

Spread Trading: Intra-Contract Spreads
- Calendar spread
- Butterfly spread
- Condor spread
- Introduction to strips, packs, bundles and stacks

Spread Trading: Inter-Contract Spreads
- Price sensitivity
- The swap spread
- Trading swap spreads using bonds and bond futures against STIR futures
- Introduction to basic bond pricing
- Introduction to bond futures
- The TED spread
- OIS/LIBOR Spreads
- Spreading STIR futures against swap futures
- Spreads between international STIR futures
- Summary - when to use the strategies

4. Trading Considerations for STIR Futures
Zero-Sum Game - Know the Players
- Players
- Hedge funds
- Banks
- Hedgers
- Brokers
- Independent traders/liquidity providers
- Flippers/predatory algorithms
- High frequency and algorithmic trading

Supporting cast
- 'Winning' trading systems
- The pundits

How to Play
- Specialisation
- Key characteristics and considerations
- Trader's nemesis

Game Play
- The discovery process
- Trigger point
- Guide to technical indicators
- Momentum and strength indicators

A Day in the Life of a STIR Futures Trader

Ten Rules For Trading STIR Futures

STIR Futures Contracts
Contract Specifications For Eurodollar, Euribor, Short Sterling and Euroswiss
Some Clearing Members
Independent Software Vendors (ISV)
Trading Arcades
Key Policy Rate Changes (EUR, USD)


Published: 29/10/2012
Edition: 2nd
Pages: 280
Formats: paperback - ISBN 9780857192196
ebook - ISBN 9780857192653
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