• Skip to primary navigation
  • Skip to content
  • Skip to footer
Daniels Trading

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
 

Tired of Equity Trading? Stock Index Futures Are Worth a Look

May 7, 2021 by Daniels Trading| Tips & Strategies

If 2020 taught us anything, it’s that the unexpected can create chaos in the capital markets. For astute market participants, the COVID-19-inspired volatility presented a wide range of profitable opportunities. Unfortunately, those who focused their efforts solely upon equity trading missed out on the benefits of stock index futures.

Let’s take a look at a few areas where equity futures outpace conventional stock offerings.

Diversification

According to Nasdaq’s financial dictionary, diversification is the dividing of “funds among a variety of securities with different risk, reward, and correlation statistics so as to minimize unsystematic risk.” As it relates to equity trading, diversification plays a key role in mitigating risk as well as capitalizing on aggregate market performance.

However, truly diversifying your stock holdings is much easier said than done. To gain broad market exposure, you must invest in a professionally managed mutual fund or index-based ETF—or select and purchase a variety of stocks. Each of these approaches comes with unique drawbacks, including management fees, tracking errors, and extensive research.

Stock index futures take much of the guesswork out of equities market diversification. In fact, they take it to the next level. With index futures, you can easily open leveraged long or short positions in the U.S. stock indices. You do not have to assume ownership of individual stocks, and you don’t need to invest in inverse ETFs or make special brokerage arrangements to short the market.

Want to learn more about how the Micro E-Mini futures contracts compare to the standard version? Download the comparison guide here—>>

By buying or selling the following products, a futures trader can secure bullish or bearish exposure to the leading U.S. stock indices:

Product Base Index Classification
E-mini DOW Dow Jones Industrial Average Large Caps
E-mini S&P 500 Standard & Poor’s 500 Large Caps
E-mini NASDAQ NASDAQ-100 Tech and Growth
E-mini Russell 2000 Russell 2000 Small Caps

Capital Efficiency

When compared to conventional equity trading, index futures offer vastly enhanced purchasing power. Like all futures, stock index products are traded on margin, within 3-12 percent of each contract’s notional value. By comparison, Regulation T allows for only 50 percent of a security’s value to be borrowed, with 25 percent to be held in the trader’s account at all times. Because of the reduced margin requirements, equities index futures offer the trader far greater capital efficiency than do stocks.

A premier benefit of equity index futures is that they let the trader choose how much leverage is suitable. The CME’s lineup of E-minis and Micro E-minis, as well as the Small stocks, give you the ability to customize your risk exposure:

Product Tick Value Intraday/Overnight Margins*
E-mini DOW $5.00 $750/$9,900
Micro E-mini DOW $0.50 $100/$990
E-mini S&P 500 $12.50 $750/$12,100
Micro E-mini S&P 500 $1.25 $100/$1,210
E-mini NASDAQ $5.00 $1,000/$17,600
Micro E-mini NASDAQ $0.50 $125/$1,760
E-mini Russell 2000 $5.00 $750/$7,150
Micro E-mini Russell 2000 $0.50 $100/$715
Small Stocks 75 $1.00 $500/$550
Small Technology 60 $1.00 $500/$550

*Margin requirements are subject to change

Aside from the enhanced capital efficiency of stock index futures, you’re free to trade them as frequently as you deem fit. In traditional equity trading, you can place a maximum of three intraday trades within a rolling five-day period before being labeled a “pattern day trader.” After that, pattern day trader rules apply, and an account balance of at least $20,000 must be maintained to conduct operations.

Stock index futures have no such rule. As long as you meet contract margin requirements, you can execute as many round-turn trades as you want. This is a key advantage for short-term strategies such as scalping, momentum, or breakout trading.

Level Up Your Equity Trading with Stock Index Futures

If you haven’t checked out equity index futures yet, a great place to begin is with our free guide Futures For Stock Traders. Designed for stock traders with inquisitive minds, this online guide breaks down the low margins, diverse markets, and high liquidity of equities index futures. If you’re trading the S&P 500, NASDAQ, DOW, or Russell 2000, Futures For Stock Traders is a must-read.

Micro E-Mini Comparison Guide

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.

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure
  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top