What is a 30-day fed funds futures contract?
A fed funds futures contract is an interest rate futures; i.e. a futures contract whose value is based on a fixed-income security or interest rate. The underlying interest rate for the fed funds futures contract is the average daily effective federal funds rate for the delivery month. The final settlement price for a contract is 100 minus this average rate. Unlike some other futures, a fed funds futures contract does not involve the actual delivery of the commodity or asset underlying the futures. Instead, fed funds futures are cash settled. In cases where the purchaser of a futures contract does not sell it at a later date, the net cash settlement between the buyer and seller from the point of purchase to expiration is the difference between the final settlement price and the price the futures contract was purchased for.
