Granularity is defined as “the state or quality of being composed of many individual pieces or elements.” In the world of fund managers, the term is used in reference to diversification. For active futures traders, granularity is all about managing exposure.
One way to limit the risks of trading the U.S. stock market is through Micro E-mini equity futures. Listed on the Chicago Mercantile Exchange (CME), this exciting lineup of products offers participants many strategic options. No matter if you specialize in trading small-cap or blue-chip stocks, the Micro E-minis have a contract that is right up your alley.
Breaking Down Micro E-Mini Equity Futures
The U.S. stock markets are the world’s benchmark for wealth, stability, and prosperity. Accounting for about 54.5 percent of global equities value, the New York Stock Exchange (NYSE) and NASDAQ are the top two international stock markets in terms of capitalization.
Leading U.S. Indices
The NYSE and NASDAQ feature vast liquidity and an abundance of corporate listings. To measure the relative performance of these companies, baskets of stocks are valued in a weighted average format or indexed. CME Micro E-mini equity futures are based on four of the most popular U.S. equities indices:
- Dow Jones Industrial Average (DJIA, DOW): The DOW is composed of the 30 largest “blue-chip” stocks on the NYSE and NASDAQ.
- Standard & Poor’s 500 (S&P 500): The S&P 500 is a cross section of the 500 most prominent large-cap exchange-traded stocks.
- NASDAQ 100 (NASDAQ): The NASDAQ is a tech-oriented equities index. It features around 100 of the most prominent companies on the NASDAQ exchange.
- Russell 2000 (RUT): The Russell 2000 is focused on a broad collection of small-cap or “growth” companies.
Each of these index products serves a unique purpose for stock market traders and investors. Given the diversity of their offerings, it is possible to engage the small-cap, mid-cap, and large-cap sectors of the U.S. stock market.
The CME’s Micro E-Mini Equities Indices
Stock market derivatives are an exceedingly popular mode of trade or investment. Aside from exchange-traded funds (ETFs) and options, the leading indices are targeted by a variety of equities-based futures contracts. The most commonly traded are the ever-popular E-mini and Micro E-mini products.
Here is a look at the CME’s lineup of Micro E-mini equities futures contracts:
| Contract | Symbol | Intraday Margin | Maintenance Margin |
|---|---|---|---|
| Micro E-mini S&P 500 | MES | $100 | $760 |
| Micro E-mini DOW | MYM | $100 | $680 |
| Micro E-mini DOW | MYM | $100 | $680 |
| Micro E-mini DOW | MYM | $100 | $680 |
Micro E-mini equity futures offer traders a contract that is one-tenth the size of the conventional E-minis. This is a key advantage when customizing risk exposure. To illustrate this point, consider the differences in tick values and margin requirements between the E-mini and Micro E-mini NASDAQ 100:
| Contract | Tick Value | Intraday | Maintenance |
|---|---|---|---|
| E-mini NASDAQ | $5.00 | $500 | $9,000 |
| Micro E-mini NASDAQ 100 | $0.50 | $100 | $900 |
The beauty of Micro E-mini equity futures is that they open the door to a vast number of trading strategies. Reduced tick values and margin requirements allow you to stretch your risk capital regardless of the market’s condition. Whether you’re trading during periods of calm or volatility, the Micro E-minis offer truly customizable granularity and risk exposure.
Getting Started with U.S. Stock Index Futures
To learn more about how equities index futures can help you trade the U.S. stock market, check out Daniels Trading’s free e-book Introduction to E-Mini Stock Index Futures. It will provide you with a comprehensive view of the U.S. indices from an active trader’s perspective.
