E-mini futures trading is very popular due to the low cost, wide choice of markets and access to leverage. In this E-mini futures tutorial we explain definitions, history and structure, before moving on to the benefits of day trading E-mini futures vs stocks, forex and options. Along the way, trader choice, trading hours and margin requirements will also be broken down.
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What is an E-Mini?
Although there are other E-mini contracts, E-mini is normally the abbreviation of E-Mini S&P 500, with the ticker symbol ES. Essentially, it is a stock market index futures contract listed on the Chicago Mercantile Exchange (CME).
The value of a single contract is 50 times that of the S&P stock index. So the contract size is reduced while still following the same index.
It’s also worth noting, as will be broken down in detail further below, there are a number of other E-mini contract options available, from Russell 2000 futures to S&P MidCap 400 and Dow Jones futures.
Contracts rollover to the next active contract. However, as expiration calendars show, expiry takes place each quarter, normally on the third Friday of March, June, September and December.
Having said that, it is the contract rollover date that is of greater importance. The rollover takes place on the second Thursday of March, June, September and December. Although if the date is to be a Friday, the first Thursday will be the rollover instead.
You can find upcoming details on expiries and S&P 500 options settlements by heading to the official CME website.
Unsurprisingly, the S&P 500 E-mini contract was so successful that CME and other exchanges introduced over 40 other mini futures contracts, including:
- NASDAQ 100 (futures symbol NQ)
- NASDAQ Composite (symbol QN)
- S&P Midcap 400 (symbol EMD)
- S&P Smallcap 600 (symbol SMC
- Dow (symbol YM)
- Russell 1000 (symbol RF2)
- Russell 2000 (symbol RF2)
- NASDAQ Biotech (symbol BQ)
- Commodities – Gold, silver, copper, wheat, corn, soybeans, natural gas, heating oil, and light sweet crude oil futures contracts.
- Forex – Long list of rates versus the US Dollar, including Euro, British Pound, Japanese Yen, Swiss Franc, Canadian Dollar, Australian Dollar and Chinese Renminbi.
- Options – On the S&P 500 Emini and the NASDAQ 100 Emini.
Further afield, you can also find mini Nikkei 225, Nifty 50 and FTSE 100 index futures.
However, despite a number of mini options, the S&P 500 E-mini still accounts for the vast majority of trading volume. In fact, of the over 40 other mini contracts, only 10 have daily volumes that exceed 1,000 contracts.
Also note price, volume, volatility, contract size and other specifications will all vary between each product and market.
Who Trades E-Minis?
If you do decide to start trading in E-mini index futures, who are you up against?
- 15 High-Frequency Trading firms represent approximately a third of the E-mini market.
- Around 6,000 professional intraday or position traders form nearly two-thirds of the market.
- Approximately 6,000 amateurs who trade roughly one contract per trade, every other day, represent just 1% of the total volume.
Why Trade E-Minis?
There are several factors that make E-minis a fantastic intraday trading vehicle, including:
- Global – You can trade a global equity index portfolio from just a single marketplace.
- Low cost – Deep liquidity and tight bid-ask spreads can help keep costs down. Furthermore, alternative equity index futures can help save on margin.
- Leverage – Leverage can help you buy and sell a large contract with minimal capital. This means you have plenty more options when you open your real-time S&P 500 futures bar chart.
- Access – With nearly 24-hour access, you can trade as events unfold. There are also a wealth of news sources and other online resources available. This means you can quickly identify gold futures or NASDAQ 100 symbols when a major event takes place and trade accordingly.
- Choice – The number of products and options has grown significantly. For example, you can now delve into technology and utilities select sector futures, on top of the more standard E-mini contracts.
- Resources – Brokers today offer numerous additional resources, from advanced charting packages to in-depth user guides. All of which could help you decipher Dow Jones charts, quotes and Emini ticker values, for example.
Although there are clear benefits, you should also be aware of the risks before you check S&P 500 and crude oil ticker values, including:
- Electronic trading – Speed isn’t always good news in electronic markets, as the E-mini can move rapidly. These high levels of volatility can be dangerous, particularly for new traders.
- Overtrading – With so many opportunities and an electronic interface, it can be tempting to keep trading and putting down money after big losses. This is especially true when there is access to so much convincing NASDAQ 100 futures historical data available, for example. This can all mean those without discipline risk losing a lot of capital in quick succession.
Both the pros and cons of these futures have been explained. This should help you approach that E-minis S&P 500 futures symbol list with caution.
E-Mini Futures vs Stocks, Options & Forex
You have gold contracts, major currency pairs, copper futures, binary options and so much more. So how do you know which market to focus your attention on? Let’s take a look:
- Stocks – There is certainly no shortage of choice with stocks. However, most of the time they purely track the overall market. In addition, just a single news event can send prices plummeting. Asserting an edge can also prove challenging, especially when everyone is looking at the same NASDAQ forecast on Yahoo Finance.
- Options – Although they aim to be straightforward, they usually aren’t. You often need to get the direction, size and timing of a move right. Not to mention, there are a whole host of trading strategies to get your head around.
- Commodities – This is the home of professionals. You often need to have a niche and remain up to date on all things milk, for example. In addition, with commodities, you frequently either have not enough volatility or too much.
- Forex – Despite FX trading being hugely popular, volume data is incomplete. Until banks are willing to share all volume data in real-time, you may always be a step behind trying to follow average trade size and the professionals.
Just as important as your E-mini S&P 500 futures contract price is the margin requirements. Of course, these requirements will vary among brokers. However, there are three important rates that matter:
- Intraday initial margin – This is the account balance you need to put in an E-mini intraday order. This can be anywhere from $1,000 all way up to $2,750. Note market volatility can also affect the price.
- Overnight initial margin – This is the account balance you need to make a trade overnight or during the after-hours session. Normally the price ranges from around $4,500 to $5,250.
- Account opening minimum – This is simply how much you need to open a futures account. You may need anywhere from $5,000 to $10,000.
It’s also worth bearing in mind that you shouldn’t look at just how much is 1 Emini contract and the accompanying margin rates. Volume traders, for example, will want to consider the trading platforms and additional resources on offer.
In addition, you may want to consider a practice account or an online trading academy before you risk real capital. Both will help you develop effective trading strategies while building market confidence.
Finally, you may want to consider margin rates in conjunction with other rules and regulations. For example, will low margin requirements lead to you trading more and then running into pattern day trader regulations?
E-mini S&P 500 futures trading hours run from Sunday to Friday 17:00 to 16:00 CT. However, there is a 15-minute trading gap between 15:15 and 15:30 CT. In addition, daily maintenance takes place between 16:00 to 17:00 CT.
Trading hours are broken into two sessions:
- The day trading sessions kicks off at 08:30 and finishes at 15:15 CT.
- The after-hours trading starts at 15:30 and runs until the open of the following day’s session.
As E-mini S&P 500 futures historical data and live charts demonstrate, the greatest volume is seen during the day session. Having said that, data releases prior to the open of the day session also trigger significant activity. On top of that, any major news events from Europe can lead to a spike in trading.
Note NASDAQ E-minis and other mini contracts also usually trade nearly 24 hours a day. Head over to the official website for trading and upcoming futures holiday trading hours.
A little E-mini context can give meaning to trading systems used today. These futures contracts were first implemented by the CME on September 9th, 1997. This was a result of the S&P contract, which was valued at 500 times the index (over $500,000) being simply too large for smaller players.
Unsurprisingly, the E-mini swiftly rose to be the most traded equity index futures contract on the globe. In fact, the daily volume of the E-mini is now in excess of $100 billion, which is far more than the combined volume of the underlying 500 stocks.
It isn’t just individual traders who opt for the E-mini over the bigger S&P. Hedge funds also want some of the action, as the latter relies on a frequently delayed open outcry pit system.
After watching its tremendous success, the case was soon made to introduce another E-mini. So, live charts soon started displaying the E-mini NASDAQ-100 futures contract, which is a fifth of the actual index. Furthermore, more mini products aimed at smaller traders and investors were introduced.
By the time June 2005 has rolled around, a new smaller instrument built on the S&P was made available. However, this time the underlying asset was to be 100 shares of the SPDR ETF. But unfortunately, regulatory requirements meant the margin needed per contract was almost fives time that of the bigger E-mini contract. As a result, the product never really took off with daily volume remaining under 10 contracts a day.
There are a couple of interesting recent events in the timeline of E-mini. Firstly, there was the 2010 Flash-crash sale. The US government found a single trader was responsible for selling the 75,000 E-mini contracts. In fact, the firm in question “accidentally instructed its trading program to dump them all in a series of sell orders over 20 minutes, rather than spreading the sell orders out over a much longer time period”.
On December 7th, 2016, another major event took place. Numerous buyers bought approximately 16,000 E-mini S&P 500. This was thought to be a series of stop orders caused by just one contract trading at 2225.00. Those contracts that were traded as stops, all traded “at the same nanosecond” and were thought to be worth around $1.8 billion.
This series of new high trades was quickly followed by a fierce market rally for the remaining day and the following two days. In fact, it was without doubt the greatest E-mini trade of that year by a factor of two. It is unsurprising then that analysts were quick to compare it with the Flash-crash sale six years earlier.
Final Thoughts on E-Minis
E-minis are a fantastic instrument if you want exposure to large-cap companies on the US stock market. You benefit from liquidity, volatility and relatively low-costs. You also have access to numerous markets and products, from NASDAQ biotechnology and EUR/USD futures to weekly options and Dax futures.