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Interested in Trading the Small Exchange’s Futures Products?

February 11, 2021 by Daniels Trading| Tips & Strategies

One of the greatest misconceptions about active trading is that you must “trade big” to make money. This is simply not the case. The lineup of products available on the Small Exchange can help you pursue nearly any financial goal. No matter whether your specialty is stocks, commodities, bonds, or currencies, the Smalls offer countless ways of optimizing your capital efficiency.

In this article, we provide two tips that can help you maximize your potential in this exciting trading venue.

1. More Leverage Doesn’t Necessarily Mean More Money

Applying financial leverage is the act of borrowing money to acquire an asset. Stock, futures, and forex products all rely on leverage to facilitate the trade of positions far in excess of a trader’s available capital.

To illustrate how leverage works in the futures markets, assume that you’re interested in buying one contract of the March E-mini S&P 500. To accomplish this, you’ll need to make a good-faith deposit, known as a margin, with your broker. In the case of the E-mini S&P 500, a margin of at least $750 per contract must be maintained for intraday positions, with $11,000 needed to hold one lot through the daily electronic close.

Reduced-size trading provides traders with a multitude of trade management options, and the ability to diversify holdings. Learn more about how bigger isn’t always better in our guide >>

In addition to the extensive margin requirements, the minimum tick value for the E-mini S&P 500 is $12.50. Although these dollar amounts are reasonable for many retail traders, they’re not ideal for traders with limited monetary resources.

Across the futures markets, the capital outlay for margins and tick values can be strategically constraining for a large portion of retail traders. Executing swing trades or simply weathering a period of intense volatility often prove to be nonstarters when trading full-sized issues. Fortunately, the contracts listed on the Small Exchange deliver fully customizable market exposure to traders. Here are the featured products:

Small Contract Asset Class Tick Value Margins
Small Technology 60 (STIX) Equities, Tech $1.00 $523.00/$475.00
Small Stocks 75 (SM75) Equities $1.00 $523.00/$475.00
Small US Dollar (SFX) Currency $1.00 $165.00/$150.00
Small Precious Metals (SPRE) Metals $1.00 $462.00/$462.00
Small 10YR US Treasury (S10Y) Debt $1.00 $180.00/$165.00
Small Global Oil Index (GOSME) Energy $1.00 Variable

2. You Can Realize Steady Gains by Improving Your Capital Efficiency

As you can see, the Smalls offer exposure to an array of the world’s most popular asset classes. Let’s say that you want to go long the E-mini S&P 500 (ES), but market conditions are volatile, making the margin requirements and $12.50 tick value far too expensive. In this situation, the Small Stocks 75 (SM75) on the Small Exchange provide several key advantages over traditional E-mini S&P 500 futures:

  • Granularity: Benefit from increased granularity by incrementally adding to position size. Although absorbing the ES $12.50 tick value isn’t feasible, buying three, four, five, or six contracts of SM75 may be the perfect amount of exposure.
  • Freedom: The combination of reduced tick values and maintenance margins open the door to a wide array of strategies. For instance, the $475 maintenance margin of the SM75 makes it possible to maintain exposure to U.S. large-cap stocks through the daily or weekly market close. This is a critical advantage, effectively placing swing trading and longer-term investment strategies on the table.
  • Flexibility: It’s difficult to overstate the value of being able to incrementally adjust the granularity of each and every trade. The ability to add or subtract contracts from an open position brings into play such advanced strategies as dollar cost averaging, scaling, or multi-bracket orders.

Although it’s true that trading larger sizes can lead to extraordinary returns, this approach has many pitfalls―margin calls, premature position closures, and catastrophic losses are three of the most common ones. However, optimizing your capital efficiency via the Small Exchange can mitigate these risks while promoting sound trading and long-run profitability.

Want to Learn More About the Small Exchange?

If you’re interested in learning how trading small can work for you, look no further than the market pros at Daniels Trading. Check out our Reduced Size Equals Big Opportunity e-book to discover how to use a small position to achieve consistent profitability.

E-Book: Reduced Size Equals Big Opportunity: Explore the Benefits of Trading Small

Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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