The S&P500 Emini is a futures contract that tracks the S&P500 index. It is traded on the Chicago Mercantile Exchange (CME) via their Globex electronic platform. Trading is 23 ½ hours a day, 5 days a week, using the symbol ES. Each 1 point move in the S&P500 index is worth US$50 per contract and the minimum move of the Emini futures contract (tick size) is 0.25 index points or US$12.50 per contract.
The Emini is over 15 years old
The Emini contract was launched in September 1997 to attract non-professional investors into trading index futures. The CME did this by making the contract 1/5th the size of the standard S&P500 futures contract, therefore, requiring only 1/5th the margin to trade.
Emini margin requirements vary by broker and whether you are day trading or position trading, but are approximately US$2,250 per contract to open a day trade and US$4,500 per contract to open an overnight position. Margin requirements have recently been increased because of volatility in the underlying S&P500 index.
An almost perfect trading vehicle
The Emini has a number of advantages for traders:
- Lower margin requirements than the full-size contract
- Round-the-clock electronic trading platform (Globex)
- High liquidity and, therefore, minimal slippage and tight bid/offer spreads
- Ability to go long (buy) and short (sell) with no up-tick rule
- Large volatility and high leverage
- Very low brokerage commissions
- Lower tax rate (for US traders), and
- Minimal tax reporting requirements
Over the years I have traded almost every possible security: stocks, options, commodities, futures, forex, mutual funds, IPOs, ETFs, etc. But a few years ago I finally found what I consider to be the ideal trading vehicle – the S&P500 Emini futures. I trade it exclusively now and haven’t looked back since.
The Emini has become hugely popular
Emini Futures – Monthly Volume
As a result of these advantages, the Emini has been a huge success with both non-professional and professional traders. Trading volumes have increased rapidly as the chart above shows. Monthly volumes are now averaging over 40 million contracts and the average daily volume is now more than 2 million contracts.
And is now bigger than the large SP contract
Emini Futures – Now the Largest Index Trading Vehicle
By contrast, the original large SP contract only trades about 0.5 million contracts a month – equivalent to 2.5 million Emini contracts when you adjust for margin requirements. In terms of open interest the large SP contract does better but has still been overtaken by the Emini.
The chart above shows that during 2009 the Emini (ES) overtook the large SP contract to become the largest component of the equity index futures market with just over 50% of total open interest. In the chart all the contracts have been adjusted for their relative margin size – so the Emini open interest data is divided by 5 so it’s directly comparable with the SP contract, etc.
By analyzing the volumes traded versus the open interest you can see that the Emini has become almost entirely a day trading vehicle. Whereas the large SP contract is used for position trading and hedging.
Emini Futures now come in a dozen other varieties
Emini – Monthly Volume of Varieties
With the success of the S&P500 Emini the CME (and other exchanges) decided to launch other “Emini” futures contracts covering additional US indices and commodities. These other varieties include:
- NASDAQ 100 (symbol NQ, 100 largest NASDAQ companies)
- NASDAQ Composite (symbol QN, all 3,000+ NASDAQ companies)
- NASDAQ Biotech (symbol BQ)
- S&P Midcap 400 (symbol EMD)
- Dow (symbol YM, traded on CBOT exchange)
- Russell 2000 (symbol TF, traded on NYBOT/ICE exchange, small cap index, formerly ER2 traded on CME)
- Russell 1000 (symbol RF2, traded on NYBOT/ICE exchange, 1,000 largest cap companies, formerly RS traded on CME)
- Natural gas, light sweet crude, heating oil and unleaded gasoline
However, the S&P500 Emini continues to dominate index futures as the chart above of monthly trading volumes shows. On this site when I use the word Emini I am referring to the S&P500 Emini futures contract.
And trade almost 24/5
Weekly trading of the Emini opens on Sunday at 5pm (CST) and closes on Friday at 3:15pm. Trading is almost 24 hours a day with a short break every day between 3:15pm and 3:30pm and then between 4:30pm and 5:00pm for any scheduled maintenance.
Trade is broken into two sessions: the Day session and the After-hours session. The Day session trading starts at 8:30am (CST) and closes at 3:15pm. Then the After-hours session trading re-starts at 3:30pm and continues until the open of the Day session the next morning.
The greatest activity and volume traded obviously happens during the Day session. However, data releases before the Day session open can often generate large activity, as can any important news out of Europe.
With contract expiry every quarter
Emini contracts are very similar to other futures contracts. They expire quarterly in March, June, September and December and are denoted by the letters “H”, “M”, “U” and “Z” respectively. So ES11H (or ESH11) is the symbol for an S&P500 Emini futures contract that expires in March 2011.
Contract expiry is on the 3rd Friday of March, June, September and December. However, Contract rollover – when the majority of trading moves to the next contract – is on the 2nd Thursday of March, June, September and December (unless the rollover month starts on a Friday, in which case it is on the 1st Thursday of the month).