E-mini, which stands for electronic mini, is an electronically traded futures contract that offer a fraction of the value and price of a corresponding futures contract. E-mini contracts are traded and offered widely on the CME for a number of different assets, but the E-mini S&P 500 contract is by far and away the most popular. The E-mini S&P 500 futures contract is 1/5 the size of the full S&P 500 futures contract and is one of the most popularly traded contracts in the world.
Like any futures contract, an E-mini S&P 500 futures contract is an agreement in which a buyer agrees to buy and sell a contract on the S&P 500 index for a specific price in the future. E-mini S&P 500 futures contracts are different from other futures contracts because you aren’t dealing with a physical commodity, instead you are speculating on the future value of the S&P 500 index, which is an index that tracks the stock prices of 500 of the largest U.S. companies. The E-mini S&P 500 futures contract mirrors the S&P 500 index and can be used as a pre cursor to determine price action of the S&P 500.
As with all futures contracts, the actual price of an E-mini S&P 500 futures contract changes everyday by the second. However, the size and mechanics of the contract do not. The price of an e-mini S&P 500 futures contract is $50 x the price of the S&P 500. So for example, if the S&P 500 is valued at $4,100, then the cost or value of an E-mini contract will be $205,000 (50 x $4,100) with each tick representing $12.50. This contrasts with the full S&P 500 future contract which values at $250 x the price of the S&P 500, which is often too expensive and risky for many investors and draws them towards the E-mini contract.
The largest benefit to trading the E-mini S&P 500 futures contract is that its an easily accessible and lower-risk way to own a piece of the most popularly traded index in the world. The reduced size of the E-mini S&P 500 futures contract allows accessibility to most traders, while also maintaining a good amount of leverage, which is one of the largest benefits to futures trading. Essentially, the E-mini contract is the best of both worlds.
Another benefit to trading the E-mini S&P 500 is it offers greater capital efficiency compared to other options like ETFs. If the full value of the E-mini S&P contract is $205,000, the trader is only required to put up 4.7% total cash value, which would equate to $9,635 per contract. In essence, an E-mini trader is controlling over 200k worth of the S&P 500 for an initial margin just shy of 10k, providing them with efficiency and leverage that an ETF cannot.
E-mini contracts are available to be traded 23.5 hours a day on the CME through the Globex trading platform. There are various different E-mini contracts aside from the E-mini S&P 500 futures contract. We recommend speaking to a Senior Market Strategist before trading to determine the best E-mini contract for you.
Theoretically, you can trade as many E-mini contracts as your account balance allows you. Because E-mini contracts are traded on margin ($500/contract) you can trade more contracts with less money. For example, if you have $3,500 in your account, you could technically trade 7 contracts ($500 x 7 =$3500). However, we would advise against that because you would be exposing yourself to an immense amount of risk.
There are numerous ways RJO Futures is here to help you invest in an E-mini contract. One way to would be to reach out to one of our skilled Senior Market Strategists to help coach you along the way and fine the right E-mini contract for you. We also offer numerous pieces of educational content such as our E-mini S&P 500 Investor Kit which will help get you ready to invest in the E-mini S&P 500.
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Futures trading involves the substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results.