S&P 500 E-Mini
MarketModel.com's daily trade call is solely for trading the CME E-mini S&P 500 futures.
The CME E-mini S&P 500 futures provide investors with an innovative tool for accessing and managing risks on stock market investments. Fully electronic and 1/5th the size of a standard CME S&P 500 futures contract, it closely tracks the price movements of the S&P 500 Index, the premier benchmark of stock market performance. More than 1 million contracts traded on average per day in 2006, making it one of the most highly-traded futures contracts in the world.
The "e" stands for "electronic," as this contract is exclusively traded on the CME's electronic, GLOBEX platform; and the "mini" represents the fact that this contract is one-fifth the size of the big contract.
At one-fifth the size, the e-mini is more affordable to retail traders, with lower day-trading margin requirements. This contract is traded electronically, resulting in high volume action, with volatility spikes beyond the range set by the big S&P for short periods. But generally the price action tends to follow that of the big S&P contract very closely.
What exactly is the e-mini contract?
The E-mini S&P 500 futures are legally binding agreements to buy or sell the cash value of the S&P 500 Index at a specific future date. The contracts are valued at $50 * the futures price. For example, if the e-mini S&P 500 futures price is at 940.00, the value of the contract is $47,000 ($50 * 940.00).
This also means that the value of the contract changes with every point the futures move. If the futures price is 942.00, then the contract is worth $47,100 ($50 * 942.00). If it slips to 938, the contract is worth $46,900 ($50 * 938.00). If you own or short an e-mini futures contract on the S&P 500, you are gaining -- or losing -- $50 per point.
Like all commodities futures, you are required to only put up a fraction of the contract value to actually take a position. This amount is popularly called "margin," but it is unlike the margin requirements in stock trading. It is not even margin, but rather a "performance bond," in which you agree to honor the terms of the contract by either offsetting it before expiration or making a cash settlement. The amount of the performance bond is specified by the CME. Currently it is about $3,500 per contract (See table below).
If the market moves against your position, you may be required to add additional funds to maintain the necessary bond levels. Please consult your broker for their house rules for posting the bonds (margin), and always strive to be aware of your liabilities and obligations.
Ticks
The minimum price movement of a futures contract is called a "tick." The tick value for the e-mini S&P is 0.25 index points, or $12.50 per contract. This means that if the e-mini moves the minimum price increment (one tick), say, from 940.00 to 940.25, a long (buying) position would be credited $12.50; a short (selling) position would be debited $12.50.
Trading this contract offers tremendous leverage, which is also a double-edged sword. Relatively small amount of capital can result in huge percentage gains -- but it can also quickly result in big losses and total wipeouts. Often this catches traders migrating over from equities by surprise. Futures trading requires vigilance, discipline, and fortitude.
Contract Months
E-mini S&P 500 contracts are cash-settled, just like the standard S&P 500. There is no delivery of the individual stocks. Just like the big S&P, e-mini contracts also expire quarterly. E-mini S&P 500 daily settlements and quarterly expirations will use exactly the same price as the S&P 500, thus benefiting from the liquidity of the big S&P 500 futures.
S&P 500 Index futures contracts expire each quarter, always on the third Friday of March, June, September and December. Contracts with several expirations are traded simultaneously. MarketModel.com focuses only on the leading month contract, which is by far the most actively traded.
E-mini S&P 500 Index Futures | |
Ticker | ES |
Contract Size | $50 times e-mini S&P 500 Index futures price |
Tick Size | 0.25 Index point or $12.50 per contract |
Months | March, June, September & December |
Trading Hours | From 5:30pm CT Sunday to 3:15pm CT Friday |
Expiry | Third Friday of the contract month |
Rollover | Thursday a week before the expiration Friday. The next contract month becomes the "lead contract" or the "front month." The new contract will be the day-trading vehicle from this day, even though the previous contract continues to trade until expiration date |
Margin/Bond | Exchange minimum: $3,563 |
Ticker symbols are created by combining the base symbol ES, the contract month and contract year. Month codes are:
H=March
M=June
U=September
Z=December
Therefore the ticker for the June 03 contract is ESM03
The symbol for the big car is SP and is built up the same way: SPM03
