Entering the Futures Market is Best Accomplished with the Original Emini Futures

Entering the Futures Market is Best Accomplished with the Original Emini Futures

The original Emini futures contract is the S&P500 Emini which tracks the S&P500 index. It was first launched in 1967 by the Chicago Mercantile Exchange (CME) to attract non-professional investors to the trading index futures market. It has been a huge success with amateurs and professionals alike. Trading volumes increased rapidly with monthly volumes averaging over 40 million contracts. The original large S&P only trades about 0.5 million contracts a month. (This number is the equivalent of 2.5 million Emini contracts.)

The S&P500 Emini (trading symbol ES) trades 23 hours a day, five days a week via an electronic platform, Globex. In order to attract these non-professionals the CME reduced the size of the contract to 1/5th the size of the standard S&P500 futures

contract. The reduced size required an equally reduced margin. Generally, it costs $2,250 per contract to open a day trade and $4,500 per contract to open an overnight position.

Advantages of Trading Emini Futures over Standard Futures:

1. Lower margin requirements,

2. Electronic trading platform for round-the-clock trading,

3. High liquidity, minimal slippage and tight bid/offer spreads,

4. No up-tick rule when going long (buy) and short (sell),

5. Reduced brokerage commissions, and

6. Minimal tax reporting requirements and lower tax rate for U.S. traders.

Emini futures are now the largest index trading vehicle available, holding just over 50 percent of the total open interest in

the equity index futures market. Due to the success of the S&P500 Emini futures, other similar contracts have been launched covering additional indices and commodities, including: NASDAQ 100, NASDAQ Composite, NASDAQ Biotech, S&P Midcap 400, Dow, Russell 2000, Russell 1000, and certain gases.

The S&P500 Emini futures contract continues to dominate index futures making it an excellent vehicle for amateurs to enter the futures index market. Additional information about Emini futures: each one index point move is worth $50 per contract; minimum move of futures contract is one quarter of an index point or $12.50; weekly trading is from 5 pm Sunday until 3:15 Friday; day trading is from 8:30 am until 3:15 pm, and again at 3:30 pm each weekday; contracts expire quarterly in March, June, September, and December on the 3rd Friday of each of the months; and contract rollover is the 2nd Thursday of each of those months.

Given its stability relative to the overall market, its longevity, and other listed advantages, the Emini futures contract is an excellent beginning contract for the amateur.

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