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CME contract rates
I guess I'll have to get used to the idea of my March 230 calls expiring worthless next week, but it was exciting seeing them trade at $5 for a day, after I got in at $1.
Well, I did my duty as shareholder by calling CME Investor Relations to bug them about why the stock isn't going up. I actually got ahold of John Peschier, though, and was able to ask him some questions about contract rates.
It seems to me that the perception right now is that because contract rates are dropping as the volume picks up in the lower-cost contracts, like the interest rate hedges. This in turn lowers the expected profit growth.
However, as John explained it to me, the 70 cents per contract for the electronic trades are much more profitable than the 56 cents made on trades that go to the floor, since the floor traders have to take their cut out of those trades. So actually, the increase in the volume of the 70 cent contracts is a very good thing, and the rates are extremely competetive with the European exchanges, enough that CME pretty much dominates them. He went on to say that CME is well-leveraged, and that the 4th quarter 50% growth rate is the best in their business. He mentioned that rates have been increased for their screening tool, from $30 to $35 per screen, which has made them an extra $2,000,000 in revenues per quarter since, and that rates are constantly being analyzed for opportunity to maximize profits.
So, from what I gather, as long as they keep doing what they've been doing, we will see our 260 one of these days. I wish it could be next week, but I'll take it when it comes.
I guess I'll have to get used to the idea of my March 230 calls expiring worthless next week, but it was exciting seeing them trade at $5 for a day, after I got in at $1.
Well, I did my duty as shareholder by calling CME Investor Relations to bug them about why the stock isn't going up. I actually got ahold of John Peschier, though, and was able to ask him some questions about contract rates.
It seems to me that the perception right now is that because contract rates are dropping as the volume picks up in the lower-cost contracts, like the interest rate hedges. This in turn lowers the expected profit growth.
However, as John explained it to me, the 70 cents per contract for the electronic trades are much more profitable than the 56 cents made on trades that go to the floor, since the floor traders have to take their cut out of those trades. So actually, the increase in the volume of the 70 cent contracts is a very good thing, and the rates are extremely competetive with the European exchanges, enough that CME pretty much dominates them. He went on to say that CME is well-leveraged, and that the 4th quarter 50% growth rate is the best in their business. He mentioned that rates have been increased for their screening tool, from $30 to $35 per screen, which has made them an extra $2,000,000 in revenues per quarter since, and that rates are constantly being analyzed for opportunity to maximize profits.
So, from what I gather, as long as they keep doing what they've been doing, we will see our 260 one of these days. I wish it could be next week, but I'll take it when it comes.
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