A stack hedge that uses Eurodollar futures. The hedger stacks a number of these futures for subsequent periods in one nearby delivery date. The Eurodollar futures are cash-settled and hence the hedger will keep the entire number of contracts until just prior to the expiration date and closes out the expiring ones and sells further-months, and the process continues in the same manner, each time closing out the entire “outstanding” number of contracts, nearing expiration, and selling or rolling forward a smaller number of contracts for further expirations (each time, the number will be smaller by the amount of contracts originally the hedger wanted to spread over different delivery dates).
November 19, 2023
