A trading strategy is a rules-based, structured approach to the buying and selling of securities on the open market. The key components of any trading strategy are time horizon, risk versus reward, and product. No matter what your approach to the markets may be, these three factors will largely dictate how, when, why, and what you trade.
For active traders, the lineup of products available on the Small Exchange offers the utmost flexibility. No matter your strategy, capitalization, or expertise, there’s a Small contract ideal for your needs. Don’t be fooled into thinking you have to “go big” to do big business―there are tremendous upsides to trading the Smalls.
Stay Nimble with the Smalls
Perhaps the single greatest advantage to trading on the Small Exchange is strategic flexibility. The Smalls provides countless options for trading the world’s most popular asset classes as you see fit. Here’s why:
- Time horizon: Reduced contract sizes and margin requirements open the door to intraday, day, or multiday trading strategies.
- Risk versus reward: Minimal tick values and pricing limits make aligning risk to reward less capital-intensive.
- Product: There’s a standardized Small contract for every major asset class—stocks, bonds, currencies, metals, and energies.
The Smalls offer traders product diversity, manageable volatility, and reduced margins―three attributes conducive to the application of nearly any trading strategy. How is this possible? The answer is uniform construction:
- Pricing: All Small contracts move in price increments of 0.01, which equals $1.00. Compared to other securities, it is simple to calculate unrealized gains and losses in real time.
- Expirations: The expiration of all Small contracts is the third Friday of each month. This feature removes all of the guesswork surrounding contract expiry, rollover, and settlement.
Compared to futures or forex products, the Smalls are inherently tradable. Gone are the mental gymnastics involved in calculating tick sizes and expirations―all you need is an idea, capital, and the right Small contract.
Choosing the Right Small Contract
The Small Exchange lists six products for trade based on the world’s premier markets: equities, currencies, metals, bonds, and energies. At first, six contracts sounds like an extremely limited product line. However, it’s important to remember that each Small contract is a comprehensive representation of its underlying asset class. Strategically, this functionality is ideal because you can diversify holdings while achieving pure exposure.
To illustrate this point, let’s break down the six Small contracts and the components of each:
Small Technology 60 (STIX)
The STIX tracks the 60 most active stocks facing the technology sector. Apple (AAPL), IBM (IBM), and Microsoft (MSFT) are included. The STIX has intraday limits of 9 percent and 13 percent and a daily limit of 20 percent.
Small Stocks 75 (SM75)
The SM75 is a conglomeration of the 75 most active stocks from the tech, industrial, energy, financial, and material sectors. Google (GOOGL), Caterpillar (CAT), Haliburton (HAL), and JP Morgan (JPM) are included. The SM75 has intraday limits of 9 percent and 13 percent and a daily limit of 20 percent.
Small U.S. Dollar (SFX)
The SFX contract is representative of the U.S. dollar versus a weighted basket of the seven major global currencies. Included are the euro (EUR, 33.9 percent), the Chinese renminbi (CNY, 21.3 percent), the Japanese yen (JPY, 16.2 percent), the British pound (GBP, 11.9 percent), the Canadian dollar (CAD, 7.5 percent), the Australian dollar (AUD, 5.4 percent), and the Mexican peso (MXN, 3.8 percent). The SFX has intraday limits of 9 percent and 13 percent and a daily limit of 20 percent.
Small Precious Metals (SPRE)
The SPRE is a weighted precious metals index that tracks the performance of gold (2.4466 percent), silver (96.3383 percent), and platinum (0.5108 percent). The SPRE has intraday limits of 9 percent and 13 percent and a daily limit of 20 percent.
Small 10YR US Treasury Yield (S10Y)
The S10Y is based on the pricing of 10-year U.S. Treasury notes and yields. The S10y has intraday price limits of 175 ticks and 350 ticks and a daily limit of 500 ticks.
Small Global Oil (SMGO)
The SMGO contract incorporates multiple crude oil products to track broader global oil pricing. Intraday limits are not applicable, and the daily price limit stands at 20 percent.
With these six contracts, the Small Exchange provides participants plenty of strategic freedoms. First, the reduced contract size of the Smalls allows for manageable margin requirements and tick values. These attributes make the execution of positive risk versus reward intraday, day, swing, or longer-term strategies possible.
Second, the Smalls address the world’s leading capital markets―no matter where the volatility is, there’s a contract designed to capitalize on the action. Given the capital efficiency and diversity of the Smalls, the possibilities are truly boundless.
The Small Exchange Has Something for Every Trader
Regardless of your strategy, the Small Exchange has a contract suitable for your needs. To get up and running in these exciting markets, check out our Micro, Mini, and Smalls Comparison Chart today.
