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Learning the Basics of E-Mini Futures Trading

March 28, 2018 by Daniels Trading| Tips & Strategies

The U.S. equities market is the largest in the world, boasting more than $25 trillion in value. Led by the New York Stock Exchange (NYSE) and the NASDAQ, U.S. markets are the global benchmark for liquidity and stability.

Although U.S. equities are an attractive alternative for high-net-worth and long-term investors, they present several challenges to individuals with limited capital and time horizons. Traditional methods of buying corporate stocks or mutual funds can inhibit short-term retail traders in several ways:

  • Capital intensive: Typically, substantial account minimums are required to buy and sell stocks and mutual funds.
  • Liquidity concerns: Corporate bankruptcies or restructuring can impact the trader’s ability to exit an open position.
  • Shorting restrictions: The U.S. Securities and Exchange Commission (SEC) has various restrictions in place on short selling activities.
  • Availability of leverage: In comparison to futures, the availability of leverage is limited.
  • Transaction fees: Outright purchase of stocks or mutual funds can accrue substantial asset-specific fees and commissions.

E-mini futures trading offers the benefits of U.S. equities while eliminating many of the drawbacks involved in traditional investment practices. All of the top indices are offered, including the S&P 500, NASDAQ 100 and Dow Jones Industrial Average (DJIA).

Basic Training for Futures Traders

If a trader is inclined to engage the U.S. equities markets without ever purchasing a share of stock, then any of the E-mini products provides a variety of trading possibilities and opportunities.

E-mini S&P 500

The Standard & Poor’s 500 (S&P 500) was introduced in 1957 as an index to measure the value of the 500 largest companies listed on the NYSE. Today it’s viewed as a leading indicator of U.S. economic health and includes companies from both the NYSE and NASDAQ.

The E-mini S&P 500 futures contract enables traders to manage risk or speculate upon future movements of U.S. large cap stocks. Here are the contract specs put forth by the CME Group:

E-mini S&P 500 Futures
Tick size .25 index points
Single tick value $12.50
Product symbol ES
Contract months Quarterly (March, June, September, December)
Settlement Financially settled

Trading volumes facing the E-mini S&P 500 are substantial, averaging more than 1 million contracts per session. Such volumes are a testament to its popularity and utility.

E-mini Dow Jones Industrial Average

When it comes to stock market indices, the DJIA is easily the most recognizable name in the world. Since its creation in 1896, the DJIA has been the go-to measurement for U.S. economic prowess. It consists of 30 elite public companies listed on the NYSE or NASDAQ, ranging from commercial lenders to sports apparel manufacturers.

The E-mini Dow futures contract gives short-term traders the ability to engage the DJIA without having to tie up extensive risk capital via the purchase of large-cap stocks.

The contract specs for the E-mini Dow as put forth by the CME Group:

E-mini Dow Futures
Tick size 1.00 index point
Single tick value $5.00
Product symbol YM
Contract months Quarterly (March, June, September, December)
Settlement Financially settled

Seemingly everyone has an opinion on the DJIA and where it is going. The E-mini Dow makes trading these ideas and opinions possible.

E-mini NASDAQ 100

Since its introduction in 1971, the NASDAQ has grown into the world’s second largest equities venue behind the DJIA. The calling card of the NASDAQ has always been technology, with more than 3,000 companies currently listed on the exchange.

The NASDAQ 100 index is a proportionally weighted basket of the 100 largest NASDAQ companies. It’s commonly viewed as a barometer of the technology sector and related industries’ health.

E-mini NASDAQ 100 futures are extremely useful for trading volatilities facing the tech sector. Listed below are the CME Group’s E-mini NASDAQ 100 contract specs:

E-mini NASDAQ 100 Futures
Tick size .25 index points
Single tick value $5.00
Product symbol NQ
Contract months Quarterly (March, June, September, December)
Settlement Financially settled

Many retail traders consider affordability as an attractive attribute of the E-mini NASDAQ. The $5 tick value is commonly viewed as an asset by traders looking to be active in the market without taking on too much risk.

Getting Started

E-mini products are great tools for individuals interested in trading their views regarding the world’s largest and most public equities markets. To find out more check out dT’s comprehensive online guide to E-mini futures trading.

Basic Training for Futures Traders

Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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