Emini Futures - The What And The Why

If you've been around futures trading for long, you've probably heard about Emini futures trading. However, if you're a less experienced trader, you may not have any idea this option exists...and you should.

What Are They?

Emini futures were started over ten years ago to give non-professional traders an attractive option for index futures trading. Traders trade these contracts via the CME (Chicage Mercantile Exchange) 23.5 hours per day, 5 days per week. There are other Emini futures options, including contracts tracking the NASDAQ index, fuel indices and the DOW, but the most popular is the one tracking the Standard & Poors 500 index.

The reason Emini futures are attractive to non-professionals is the size of the commitment...an Emini futures contract is only one-fifth the size of a regular S&P 500 contract, which means it requires eighty percent less margin to trade.

Your margin will vary depending on your broker, and whether you are day trading Emini futures or trading on position. On average, a day trade for the S&P 500 Emini futures contract takes around two thousand dollars, while opening an overnight position contract takes roughly twice that amount.

So as you can see emini futures are in great demand because of the lower capital requirements, the lower fees charged by commissions and the ease of entry for trading.

A 1 point move of the emini S&P 500 futures equals a value of $50 per contract traded. Each move is a quarter of a point in value. Due to the fact that the Emini S&P 500 futures contracts are traded in an electronic format you will hav ethe ability to trade at any time of the night or day. The only time you will not be able to trade is during scheduled maintenance times and planned days of being closed. This allows you to adjust your position more frequently, taking advantage of the volatility of this market.

Why You Will Want to Trade Them

Obviously the easist answer to this is for an income but there is a lot more to this than just making a profit. As we have stated it will require you less capital to buy a emini futures contract and you can trade them pretty much at any time of the day you desire. You also enjoy a lower tax rate for US traders, lower brokerage commissions and fewer tax reporting requirements than other options.

Volatility is also another great benefit to trading of the emini futures in addition to the elevated leverage that they provide. The potential for financial gain is huge, especially when you take into account the minimal initial margin investment required to participate. As always, though, remember that any potential for gain is accompanied by an equal chance for financial loss. Having said that, Emini futures can be an excellent starting point for those interested in the futures trading market.