Emini Trading – A brief history and overview
Emini trading is a fairly new financial derivative which was introduced in 1998. A popular e-mini futures market is the S&P 500 stock index. Prior to e-minis, it was relatively difficult and expensive for the average private trader to participate in the futures markets located on the Chicago Mercantile Exchange. The cost of an e-mini futures contract is 1/5 the size of the regular S&P 500 futures contracts. At $50 per point, the emini is much more affordable to trade than the regular contracts. Also, e-minis are traded 100% electronically, meaning there’s no trading pit for an e-mini market. This gives a level playing field for both professionals on Wall Street and individual investors.
Since emini futures are based on a stock index, the movement isn’t tied to one company. This means traders don’t need to focus on hundreds of individual companies. Rather, they can focus on the market as a whole, or a stock index like the S&P 500, NASDAQ, or Russell 2000. The popularity of e-mini trading is due in part to the volatility and liquidity sustained throughout most of the trading day. Unlike individual stocks, the indices tend to have a large trading range with many market participants. For professional traders, this means more opportunity.
With e-minis, you trade for points. In the S&P 500, each point is worth $50. There are 4 “ticks” per point, which are valued at $12.50 each. Let’s say you make 3 points on the ES. That would be a $150 profit. You could also trade more than 1 futures contract. If you were trading 10 contracts, that 3 point profit would become $1,500. By trading multiple contracts, you’re able to leverage your time and efforts. Before deciding to trade eminis, one should keep in mind that there are great risks in trading any market. There are no guarantees in trading, and risk management is something you should research before risking your own capital.
If you’re looking to learn how to day trade e-minis, we recommend learning more by attending a free online trading class.
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