Introduction to Futures – E-Minis and E-Micros:
Futures are an agreement to buy or sell something at a predetermined price and at specified times. Futures contracts can be lucrative but purchasing the underlying asset can be expensive. Since most traders do not wish to purchase the underlying asset, they typically close their positions at least two weeks before the expiration date.
Trade futures with a small account: Futures contracts inherently hold significant amounts of leverage, which makes trading futures contracts difficult for beginning traders. Luckily as of recent, there has been an expansion towards E-Mini and E-Micro futures contracts, representing a fractional value of standard futures. These contracts can be primarily traded on the Chicago Mercantile Exchange and the New York Board of Trade.
Why E-Minis Are Good For Small Accounts:
The e-Mini S&P 500 Futures Contract is one of the most liquid and widely traded US equity index futures contracts. The contract has a notional value of $50 times the S&P 500 index, which is much less than the full-sized contract. In addition, the e-Mini S&P 500 has a smaller tick size (0.25) than its full-sized counterpart, allowing for more precise trading. The E-mini S&P 500 futures offer trading advantages that many other contracts do not offer. They are very liquid, which equates to tight spreads, and are much more accessible and affordable to retail investors. The margin requirements are much less for E-mini futures, compared to full-sized contracts, and one can trade 23.25 hours each day, Sunday–to Friday.
Types of E-Mini Contracts
There are many types of E-Mini contracts which are traded each day. The most popular E-Mini contract is the E-Mini S&P 500 (ES). The notional value of this contract is 50 times the value of the S&P 500, so if the S&P 500 reaches $2,800, the contract would be worth $140,000. There are also E-Minis for the Dow Jones Industrial Average (YM), Russell 2000 (RTY), and Nasdaq-100 (NQ).
Trading with the E-micro
The E-Micro contract is traded on the CME and is one-tenth the size of an E-Mini contract. With these contracts, new traders who may have smaller portfolios can have greater customization over order quantity and risk management, reducing losses you may experience as you learn to trade. These are the ideal tool for trading with less.
Types of E-micro Contracts
The main advantage of E-micro contracts is that they help further diversify the futures markets. Indeed, these smaller versions of their full-size counterparts have been a hit amongst retail traders, as it gives them another way to get exposure to the financial markets more cost-effectively. They are also quite useful for those who don’t have the spaciousness to trade the standard size contract.
Conclusion:
With new developments within the financial markets, traders can find products that best suit them, their experience and their trading strategies. E-Minis aid retail traders in lowering the amount of risk they would have assumed while accessing the futures market. While trading can be both exciting and rewarding, there is risk associated with it and by offering the E-Mini product, traders can find a product that is right for them. The E-Micro products allow traders to seek out different instruments based on price movement to fit the style of trades they are looking for.
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