How do you calculate the invoice price paid to the short at delivery?

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AcadiFi · Accepted Answer

The invoice price (what the long pays, short receives) equals Futures Settlement Price * Conversion Factor * Face Value / 100 + Accrued Interest. Consider Halcyon Rates delivering the 2.75% of 2040 against June 10-year futures. Settle price is 118-16 (118.50), CF is 0.8234, face is $100,000, and accrued interest at delivery is $1,247. The invoice is 118.50 * 0.8234 * 1000 + 1247 = $97,572.90 + $1,247 = $98,819.90.

The economic P/L for the short equals invoice price minus bond purchase cost. If the cash bond traded at 96-24 + accrued of $1,247 = $97,997, the short pockets $822 net of the basis and financing. Traders track this daily to decide whether to deliver or unwind the futures position before first notice day. Conversion factor is fixed per contract cycle, so only settle price and accrued interest change day to day. Always verify CF against CME's published table; misreading 0.8234 as 0.8432 creates a $2,000+ error per contract.

How do you calculate the invoice price paid to the short at delivery?

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