S&P E-Mini Futures
S&P e-mini futures is one of the most popular stock market index futures contracts. The contract is traded mostly on the Globex electronic trading platform of the Chicago Mercantile Exchange under the ticker symbol ES and has a notional value of fifty times the value of the S&P 500 stock index. S&P 500 is the underlying index which is the most commonly followed gauge of the performance of the stock market.
The S&P e-mini futures contract was introduced in 1997 when the value of the already existing S&P contract became too large for small traders. The mini contract was, thus, introduced to allow small traders to access futures trading as the ‘big’ contract was valued at about 500 times of the S&P 500 index.
S&P e-mini futures are attractive contracts that are traded from Sunday to Friday from 5 pm to 4 pm, Chicago Time. It makes these mini futures contracts appealing to traders all over the world as they trade across all the time zones. The contract months are the nearest five months in the quarter cycle, and there are options available for quarterly, monthly, or weekly contracts. Thus, the mini futures contracts of S&P allow small traders to trade global equity index portfolio, without a substantial investment.
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Why Trade S&P E-Mini Futures
S&P e-mini futures is the most active stock index futures contract in the world. It offers traders a mix of opportunity, flexibility, and affordability. Overall, the S&P e-mini futures contract provides a highly cost-effective solution to manage the exposure to the S&P 500 index.
There are many reasons why it is an excellent choice to trade S&P e-mini futures. Some of the most important rationales are discussed below.
- Liquidity: S&P e-mini futures offer deep liquidity to traders. The execution options are quite flexible making it easier for traders to find different ways of liquidity. Specifically, the liquidity provided by S&P e-mini futures is 8 times the value of all S&P 500 ETFs combined.
- Affordability: S&P e-mini futures are very cost-effective. Traders can trade the S&P 500 stock index without investing a heavily. At the same time, traders do not need to pay any management fee for trading S&P e-mini futures and get access to tight bid-ask spreads for reduced costs.
- Leverage: S&P e-mini futures allows traders to trade a large contract value with a small amount, using leverage. Overall, e-mini futures give 60 times more buying power of cash stocks leading to a larger value with less capital.
- Tax Benefits: Trading S&P e-mini futures has its own tax benefits. The mini futures of S&P get 60/40 blended US tax treatment on capital gains, wherein 60% of the profits are taxed at the rate of long term capital gains while 40% of the profits are taxed at the rate of short term capital gains.
- Reduced Risks: S&P e-mini futures help in diversification of the risks compared to other holdings in the portfolio. Traders only need to track one S&P e-mini future compared to 500 stocks and still get the same amount of exposure. The counterparty risk is also mitigated due to central clearing system.
- Simplicity: Trading S&P e-mini futures is quite uncomplicated. Traders can trade the entire stock index portfolio from one marketplace and have almost 24-hour access to the markets. S&P e-mini futures do not have any special requirements like uptick rule or any other complications.
Alternatives To Trading S&P E-Mini Futures
S&P e-mini futures allows small traders to use a small amount of capital to get significant exposure. It works well for new traders as they neither have a lot of capital to risk nor do they have a lot of expertise and experience.
However, there are a few other excellent alternatives for new traders who are short on capital and risk appetite. One of the most significant alternatives is the education program of Tradenet. The education packages come in different categories and at different prices and include features like study courses, access to live trading room, access to live and recorded videos on the Tradenet YouTube channel, and much more.
Traders, who get equipped with the knowledge and practical experience through Tradenet’s education programs, can apply for Tradenet Trading Challenge. The winners of the challenge get access to a $14,000 funded day trading account with up to 70% profit split.
In this way, new traders can become eligible to trade using a funded account even in the early stages of their career. It will allow them to learn as they go, without risking their own capital. Tradenet’s education packages are a suitable alternative to trading S&P e-mini futures as both involve low capital and less risk.