Understanding Eminis: Beginner's Guide

[Soultrader]

Two popular e-mini contracts:

• E-mini S&P 500
• Symbol: ES
• Exchange: Chicago Mercantile Exchange (CME)
• Value of 1 Tick: 0.25 = $12.50
• Value of contract: $50 x S&P price = Value
• Trading Hours: 5:30 pm Sunday to 3:15pm Friday (Central Time)
• Contract Months: March, June, September, December
• Last Trading Day: Up to 8:30 am on the 3rd Friday of contract month
• E-mini NASDAQ 100
• Symbol: NQ
• Exchange: Chicago Mercantile Exchange (CME)
• Value of 1 Tick: 0.50 = $10.00
• Value of contract: $20 x NASDAQ price = Value
• Trading Hours: 5:30 pm Sunday to 3:15pm Friday (Central Time)
• Contract Months: March, June, September, December
• Last Trading Day: Up to 8:30 am on the 3rd Friday of contract month

While the big S&P 500 contracts are traded in the pit using an open outcry auction system, the emini futures are traded in an electronic marketplace. This allows minimum slippage attracting smaller investors. Futures, unlike stocks, do not have a short selling rule on a uptick. This is a benefit for traders as well as the nice leverage one can get trading the emini's.

What are stock index futures?

A stock index represents a portfolio of stocks grouped accordingly. For example, the NASDAQ 100 index represents 100 companies while the S&P 500 index represents 500 large capitalization companies. The S&P 500 is also a benchmark used by money managers to measure their portfolio performance.

On the other hand, the mini-sized Dow futures contract represents only 30 stocks. Also known as the mini Dow, it is traded on the Chicago Board of Trade. Ticker symbol: YM.

Futures Contract Month Symbols:

Emini futures settle and expire on a quarterly cycle. The contract month, also known as the delivery month is the month in which the contract expires. Most traders switch contracts at the roll over date. This can easily be identified by looking at the liquidity. When traders migrate from one contract to the next, liquidity drops.

• Contract Month Symbols
• March: H
• June: M
• September: U
• December: Z

What is a TICK?

A tick is the minimum price movement in the futures contract. One tick in the S&P 500 emini is equivalent to 0.25 points or $12.50. One tick in the mini Dow is equivalent to 1 point or $5.

How much do I need to start trading?

Depending on your broker, you can start trading eminis anywhere from $2000 - $5000. However, I do not recommend this. Playing the futures markets is a risky game unless you understand what you are doing. For any new traders looking to trade the emini's, I recommend a minimum of $20,000 and trade 2 contract at most only.

Always test your setups and paper trade if you are not ready. Also, when picking your broker, make sure you are getting good fills without any slippage. Slippage and commision can cost heavily. Choose a reliable broker who will connect you to the trading desk if your computer crashes or internet connection dies.

Good luck & best of trading,

Soultrader

[cooter]

Hi SoulTrader,

Nice tutorial for the beginner. You should note that the CME has changed the e-mini Nasdaq from half-tick increments to quarter-ticks (0.25 of a point) for a while now.

Value of 1 tick (0.25 of a point) on e-mini Nasdaq 100 = $5.00

More info here: CME E-mini NASDAQ-100 Futures & Options

[brownsfan019]

Here are a couple great sites for those new to e-mini's:

CME Education

CBOT - mini-sized Dow ($5) Quotes Electronic

CBOT - Publications
>Scroll down to Index Publications and look for mini-sized dow info.