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Learn about E-mini (ES) S&P Futures
E-mini S&P 500 (ES or E-mini) Futures are one of the most important financial instruments traded today. ES futures are the mini futures contract (1/5 the size) of the standard S&P futures contract and are traded on the Chicago Mercantile Exchange electronically. The dollar value of ES futures contracts are based on the current price of the S&P 500 stock index, and thus traders are able to participate in the equity market while still benefiting from the flexibility and advantages of trading a futures contract. A major advantage of trading E-mini futures contracts is that it allows traders to trade the market as a whole without having to worry about individual stock losses or gains.
The S&P 500 index represents the market capitalization of 500 large American corporations which are listed on the NYSE or NASDAQ. The S&P 500 is the world’s most widely followed financial benchmark as it is the best representations of the U.S. stock market and the U.S. economy. The S&P 500 is a weighted indice, and companies with a larger market capitalization (share price multiplied by the number of outstanding shares) have a greater impact on the value of the index than companies listed in the exchange with lower market capitalization.
The smallest increment of movement (a tick) for an E-mini futures contract is 0.25 which is equivalent to a dollar value of $12.50. Thus one full point movement of the ES is equivalent to: 0.25 X $12.50 = $50. This means that for every contract you sell or purchase, a 1 point movement is equivalent to a $50 profit or loss depending on whether your prediction was right or wrong.
The value of one ES contract is the current dollar value of the S&P 500 index (approximately $2,000) multiplied by $50 (each full point is worth $50).
So for example, the full value of the ES contract is: $2,000 X $50 = $100,000
(For the day trading that we do at SizeTrade the current dollar value of ES contracts is irrelevant and has no real effect on profits or losses).
S&P futures (ticker symbol SP) contracts are 5 times larger than ES futures contracts. ES futures contracts were developed so that smaller players (other than large financial institutions) could participate in the index futures market. The minimum tick size for SP is 0.10 index points which is equivalent to $25. Thus one full SP point is valued at 0.10 X $25 = $250 (5 times greater than the ES futures contract).
The value of one SP contract is the current dollar value of the S&P 500 index multiplied by $250.
For example: $2,000 X $250 = $500,000.
In contrast to ES which is fully electronically traded, SP futures are mostly traded by institutional investors and on the open outcry floor (the classic image of traders yelling at each other and waving their hands in the air to make orders go through). The value of the SP future is about 5 times greater than the ES mini contract as well as the initial margin requirement per contract which is $25,000 for the SP as opposed to about $5,500 for the ES.
Practical ES Trading Information
The E-mini ticker symbol is ES plus the code for the expiration month and year. The e-mini contracts expire quarterly on the 3rd Friday of the month: March, June September and December (“H” , “M” , “U” and “Z” respectively. As a general rule, the contracts with the expiration closest to the trading date have the highest liquidity. So if the month is February, then March’s contract will have more liquidity than June’s. Below are the ticker symbols for Emini 2017.
March 2017 contract: ESH7
June 2017 contract: ESM7
September 2017 contract: ESU7
December 2017 contract: ESZ7
The VAST majority of traders should NEVER hold a future past expiry. 10 contracts would be delivery of $1,000,000 worth of stock roughly! ($2,000 X $50 X 10 contracts = $1,000,000)
Most brokers won’t even let you do this.
As the date moves closer and closer to the expiry date (usually within a week), traders begin trading the next quarter contract. At expiry the current quarter contract is usually within 10 points of the next following quarter contract.
There are Major Benefits to Trading ES Futures
* SizeTrade is not a financial advisory service. SizeTrade does not making any recommendations regarding the size of investments that you should make, margin requirements, or the account size with which you should hold.
** SizeTrade is not a tax advisory service. Please seek professional tax advice from a licensed attorney or tax advisor.