What are Emini S&P Futures?
In summary the E-Mini S&P, often abbreviated to "E-mini" and designated by the commodity ticker symbol ES, is a stock market index futures contract traded on the Chicago Mercantile Exchange's Globex electronic trading platform. The notional value of one contract is 50 times the value of the S&P 500 stock index. It was introduced by the CME on September 9, 1997 and quickly became the most popular equity index futures contract traded in the world. Trading is broken into two sessions: Day session starts at 8:30am (CST) and closes at 3:15pm and after-hours session trading starting at 3:30pm and continues until the open of the Day session the next morning. Emini contracts are very similar to other futures contracts. They expire quarterly in March, June, September and December and are denoted by the letters “H”, “M”, “U” and “Z” respectively.
So Why Trade Emini Futures?
In my humble opinion, Emini futures are the perfect day trading vehicle. They have many advantages for both day traders and longer term traders and here are some of the highlights:
In my humble opinion, Emini futures are the perfect day trading vehicle. They have many advantages for both day traders and longer term traders and here are some of the highlights:
- The CME is a regulated Central Exchange: The CME (Chicago Mercantile Exchange) records all trades which are public and are filled on a "first come, first served" basis. Since there are no pits or floor brokers involved, the CME must follow consistent clearing rules. This means that all traders have access to the same level 1 and level 2 data and bid/ask spread, which provides a level playing field for all traders large and small, and is less apt to be manipulated by a few large players.
- Volume data availability: The availability of consistent exchange data such as trade volume and level 1 and level 2 bid/ask, open interest, etc. nearly instantaneously offers an advantage, an "Edge" even over markets where this type of data is not available or available on a delayed basis only. Since the Forex market is over the counter (OTC), there is no centralized exchange, no one place where trades take place therefore, there is no accurate record of volume and most Forex charts will not even show any indication of volume.
- 24-Hour trading: Globex connects the day session for nearly non-stop trading availability. Exceptional liquidity allows even overseas markets to trade with the this one symbol. The volume is typically less in the "overnight" session but has times when the European market or Asian markets become active and large quick moves can still occur. In contrast, even with pre and post market trading, the stock market is open less than 12 hours per day, and the liquidity during these sessions are not always good.
- High Liquidity: This means that it has a lot of volume and a lot of volatility or "action". High volume means you can enter and exit very quickly as there are many contracts available to take the other side of a trade. When electronic trading first began in 1997, the e-mini contract trading volume averaged 7,000 contracts per day. Today, it is not uncommon to see 3-4 million contracts trading daily.
- Easy to go long or short the market: You can trade the e-mini futures long (hoping the contracts will go up) and you can trade the futures short (hoping the contracts will go down). Lately, there have been bans put on short selling financial stocks, bans on naked short selling including the 1,000 top stocks, bans on short selling stocks that are less than $5, etc. There are no restrictions on short selling e-mini Futures Contracts. Why? Because these are contracts, not shares of a particular stock. As traders, we want to take full advantage of the Market's volatility. If we cannot short, then half of trading is lost to us.
- Electronic trading platform: With Tradestation, my fills have been very consistent and lightning fast throughout the years. I traded pit options for a while and never knew if my standing order was filled or not and usually took a call to my broker to verify status. It was not uncommon for this to take up to 30 minutes. Since the Emini orders are electronic by their nature, there are no delays while you call the broker, who calls the pit, who has to run down the order, etc. Not to mention you can trade from anywhere at any time.
- Low margins for daytraders: Margins are very favorable to Futures traders. Unlike stocks, where the account margin is higher for those wishing to enter and exit a market on the same trading day, the day-trading margin for futures is much lower. Depending on the broker, you can trade one Emini S&P contract for as little as $400 on margin.
- Your fills are guaranteed: If you are in a trade, for example, and the e-mini price goes through your offer, you get filled. No questions asked. This is a major problem for smaller Forex traders. You may be in a trade waiting to exit and you have an offer to sell. The Forex contract goes right by your price and does not fill you. Then you read in fine print on your Forex Brokers contract that they do not guarantee fills.
- Low brokerage rates: Brokers rates have become very competitive throughout the years. Ironbeam Brokers advertise a rate of $0.82 per contract per side (as of June 2016). This excludes exchange and clearing fees which makes a full trade (enter and exit, or "round trip") about $3.80 per trade. TradeStation's rate is a bit higher but this includes use of their charting platform and with a minimum of 10 trades/month there is no platform fee.
- Tight bid/ask spreads: Since the volume is large and growing for the Emini market, the difference between the bid and the ask seen most of the time is only ever 1 tick or 0.25 points. Rarely does the spread go above a couple of ticks. Forex for instance can often have large spreads meaning you don't get filled at the price you entered at, commonly referred to as "slippage". If you've ever received a large slippage when trading other markets, you'll understand how substantial this can be.
History
E-Mini S&P, often abbreviated to "E-mini" (despite the existence of many other E-mini contracts) and designated by the commodity ticker symbol ES, is a stock market index futures contract traded on the Chicago Mercantile Exchange's Globex electronic trading platform. The notional value of one contract is 50 times the value of the S&P 500 stock index.
It was introduced by the CME on September 9, 1997, after the value of the existing S&P contract (then valued at 500 times the index, or over $500,000 at the time) became too large for many small traders. The EMini quickly became the most popular equity index futures contract traded in the world. The original ("big") S&P contract was subsequently split 2:1, bringing it to 250 times the index. Hedge funds often prefer trading the EMini over the big S&P since the latter still uses the open outcry pit trading method, with its inherent delays, versus the all-electronic Globex system. The current average daily implied volume for the Emini is over $100 billion, far exceeding the combined traded dollar volume of the underlying 500 stocks.
Following the success of this product, the exchange introduced the E-mini NASDAQ-100 contract, at one fifth of the original NASDAQ-100 index based contract, and many other "mini" products geared primarily towards small futures speculators and traders, as opposed to large hedgers.
In June 2005 the exchange introduced a yet smaller product based on the S&P, with the underlying asset being 100 shares of the highly-popular SPDR exchange-traded fund. However, due to the different regulatory requirements, the performance bond (or "margin") required for one such contract is almost as high as that for the five times larger EMini contract. The product never became popular, with volumes rarely exceeding 10 contracts a day.
According to US government investigations the sale of 75,000 Emini contracts by a single trader was the trigger to cause the 2010 Flash Crash. This claim was later refuted by the Chicago Mercantile Exchange.
Trading Times
Trading is broken into two sessions:
- Day session starts at 8:30am (CST) and closes at 3:15pm.
- After-hours session trading starts at 3:30pm and continues until the open of the Day session the next morning.
- There is one break daily between 3:15pm and 3:30pm and recently the exchange added another small break between 4:15pm and 5:00pm for "scheduled maintenance".
Contract Rollover
Emini contracts are very similar to other futures contracts. They expire quarterly in March, June, September and December and are denoted by the letters “H”, “M”, “U” and “Z” respectively. So ES14H (or ESH14) is the ticker symbol for an Emini S&P 500 futures contract that expires in March of 2014.
To make things easier you can also chart a “continuous” contract on most charting platforms. Data providers join together (or concatenate) symbols from adjoining quarters so you can plot a long history of each contract. In TradeStation, the continuous Emini futures contract has a symbol of @ES.
Emini contracts rollover and expire every quarter. Contract expiry is on the 3rd Friday of March, June, September and December. However, contract rollover – when the majority of trading moves to the next contract – is far more important. Check out the blog section on EminiEdge.com to learn how Trader Joe actually trades rollover days.
Contract rollover is on the 2nd Thursday of March, June, September and December, unless the rollover month starts on a Friday, in which case it is on the 1st Thursday of the month.
Credit to Wikipedia for some content on this page.
E-Mini S&P, often abbreviated to "E-mini" (despite the existence of many other E-mini contracts) and designated by the commodity ticker symbol ES, is a stock market index futures contract traded on the Chicago Mercantile Exchange's Globex electronic trading platform. The notional value of one contract is 50 times the value of the S&P 500 stock index.
It was introduced by the CME on September 9, 1997, after the value of the existing S&P contract (then valued at 500 times the index, or over $500,000 at the time) became too large for many small traders. The EMini quickly became the most popular equity index futures contract traded in the world. The original ("big") S&P contract was subsequently split 2:1, bringing it to 250 times the index. Hedge funds often prefer trading the EMini over the big S&P since the latter still uses the open outcry pit trading method, with its inherent delays, versus the all-electronic Globex system. The current average daily implied volume for the Emini is over $100 billion, far exceeding the combined traded dollar volume of the underlying 500 stocks.
Following the success of this product, the exchange introduced the E-mini NASDAQ-100 contract, at one fifth of the original NASDAQ-100 index based contract, and many other "mini" products geared primarily towards small futures speculators and traders, as opposed to large hedgers.
In June 2005 the exchange introduced a yet smaller product based on the S&P, with the underlying asset being 100 shares of the highly-popular SPDR exchange-traded fund. However, due to the different regulatory requirements, the performance bond (or "margin") required for one such contract is almost as high as that for the five times larger EMini contract. The product never became popular, with volumes rarely exceeding 10 contracts a day.
According to US government investigations the sale of 75,000 Emini contracts by a single trader was the trigger to cause the 2010 Flash Crash. This claim was later refuted by the Chicago Mercantile Exchange.
Trading Times
Trading is broken into two sessions:
- Day session starts at 8:30am (CST) and closes at 3:15pm.
- After-hours session trading starts at 3:30pm and continues until the open of the Day session the next morning.
- There is one break daily between 3:15pm and 3:30pm and recently the exchange added another small break between 4:15pm and 5:00pm for "scheduled maintenance".
Contract Rollover
Emini contracts are very similar to other futures contracts. They expire quarterly in March, June, September and December and are denoted by the letters “H”, “M”, “U” and “Z” respectively. So ES14H (or ESH14) is the ticker symbol for an Emini S&P 500 futures contract that expires in March of 2014.
To make things easier you can also chart a “continuous” contract on most charting platforms. Data providers join together (or concatenate) symbols from adjoining quarters so you can plot a long history of each contract. In TradeStation, the continuous Emini futures contract has a symbol of @ES.
Emini contracts rollover and expire every quarter. Contract expiry is on the 3rd Friday of March, June, September and December. However, contract rollover – when the majority of trading moves to the next contract – is far more important. Check out the blog section on EminiEdge.com to learn how Trader Joe actually trades rollover days.
Contract rollover is on the 2nd Thursday of March, June, September and December, unless the rollover month starts on a Friday, in which case it is on the 1st Thursday of the month.
Credit to Wikipedia for some content on this page.