What Are Emini Futures and Why Trade Them?

Emini S&P 500 futures are probably the most important trading vehicle in the world.

The Emini (or E-mini or ES) is a futures contract that tracks the S&P 500 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 ticker symbol ES. Each 1 point move in the S&P 500 index is worth US$50 per Emini contract and the minimum move of the Emini futures contract (or tick size) is 0.25 index points.

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Emini futures are the perfect day trading vehicle

The Emini has a number of advantages for traders and day traders:

  • Equally easy to go Long or Short: You either buy or sell the current Emini contract and there is no up-tick rule. If you traded the SPY ETF you would have to buy or sell different ETFs (Long: SPY or leveraged SSO; Short: SH or leveraged SDS).
  • 24-Hour trading: Which makes the Emini attractive to traders around the world. Overnight moves in related equity markets, like the DAX or FTSE, can be played with the one trading vehicle.
  • Electronic trading platform: Your orders are entered instantaneously and when executed you are notified instantaneously. Changing and cancelling orders is trivial – no phone call to your broker required – and you know exactly where you stand every minute you’re in a trade.
  • Level playing field: The Globex electronic trading platform means that large and small traders have equal access to the market and trades are executed in the order they are received. Unlike pit-traded futures, no games can be played.
  • Tight bid/ask spreads: So much volume is traded through the Emini, the difference between the bid and the ask price is only ever 1 tick or 0.25 index points – the minimum.
  • Large depth of market: Again, the Emini market is so liquid, there is plenty of volume either side of the last traded price for large orders to be filled with minimum slippage (or difference from the last traded price).
  • Volatile but not unmanageable: The Emini is active every day, which gives the day trader plenty of opportunity to trade. Remember, a “sleepy” market is impossible to day trade. But the Emini volatility is also manageable – except maybe around FOMC announcements – and is not driven by individual company news events.
  • Low brokerage rates: Broker commissions for trading Eminis continue to fall. Interactive Brokers advertise a rate of $0.85 per contract per side (as of March 2015). This excludes exchange and clearing fees and when you factor those in, your “round trip” or “in-and-out” brokerage commission is closer to $2.00 per trade. TradeStation’s advertised rate is $1.15 per contract per side, but this includes use of their excellent charting platform.
  • Low margin requirement: To open a day trading position with Interactive Brokers you only need margin of $2,875 per Emini contract. This margin requirement doubles to $5,750 per contract if you hold the position overnight. TradeStation offers an even lower margin requirement for Emini day traders of $1,265 per contract. Remember, these are absolute minimums – you should be trading with much more capital behind your positions.
  • Low minimum account size requirement: To open a futures trading account with Interactive Brokers you need to deposit a minimum of $10,000. The same minimum account opening deposit for TradeStation is $5,000. But if you are an active stock trader you will be classified as a Pattern Day Trader and need to maintain a minimum account balance of $25,000.
  • Lower tax rate than trading forex or stocks: Income from trading Emini futures is taxed at a “blended” rate of 23% (60% capital gains taxed at 15% + 40% income taxed at 35%). Gains from trading stocks or cash forex is taxed at 35%. These comments apply to US-based traders and remember to always get your own tax advice.
  • No trade-by-trade accounting: Another advantage of the tax treatment of Emini futures is that the tax reporting requirements are minimal. In particular, no trade-by-trade accounting is required, only the net income for the full year is needed.
  • Better than Stocks, Forex, Commodities and Bonds: Check out this video for more reasons to trade Emini futures and avoid individual stocks, forex, commodities and bonds.

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&P 500 Emini futures. I trade it exclusively now and haven’t looked back since.

Who trades the Emini? Everyone!

image of growth in Emini futures trading volume from 1997 to 2015

The Emini is Hugely Popular (Emini monthly trading volume, 1997-2015)

Emini futures were originally launched in September 1997 to attract non-professional investors into trading index futures. Previously, the only game in town had been the “large” SP contract – but it had become too expensive for the “little guy” to trade. So the CME created the Emini contract which was 1/5th the size of the “large” S&P 500 futures contract and required 1/5th the margin to trade.

Over 10 years, the Emini became a huge success. Not only with non-professionals but with professional traders too. Now everyone trades the Emini: mutual funds, pension funds, hedge funds, insurance companies, high frequency trading (HFT) firms, trading syndicates and individual/non-professional traders.

The chart above shows the growth in monthly Emini trading volumes. The huge volume spikes of over 80 million contracts traded happened during large market sell-offs. Average daily trading volume is regularly over 2 million contracts. Between 2012 and 2015 trading volumes have backed off, but that decline in trading activity has been seen across all traded markets.

So that puts the Emini in the Top 3 Largest Traded Markets in the world. Here are my estimates of the daily capital traded for each of these markets:

  • SPY (S&P 500 Index ETF) = 106 m trades daily x $200 price = $21 bn in capital
  • Euro/ US Dollar (Spot Forex) = $78 bn total Forex market x 24% Euro share = $19 bn in capital
  • Emini (ES only) = 1.6 m trades daily x 2 parties x $5 k margin per contract = $16 bn in capital

Note: The SPY ETF is largest but it is more a position taking market than a day trading vehicle.

image of Emini futures trading by trader type

Emini Trading by Trader Type (Average of 3-5 May 2010, Joint CFTC/SEC Report)

And the chart above shows a breakdown of Emini trading volume by type of trader. 15 High Frequency Trading (HFT) firms account for one third of the total Emini market. Almost 6,000 Professional traders (either day trading or position trading, i.e. holding overnight) account for the other two thirds of the market. The 6,000 Amateur traders (trading on average 1 contract per trade and 1 trade every other day) account for only 1% of the total Emini trading volume. (Source: “Findings Regarding the Market Events of 6 May 2010″ Joint Report of CFTC & SEC 30 Sept 2010, page 29)

Update – 42,000 Emini Traders & 30 HFT Firms

Nanex Resarch published some more data points based on CFTC data that was used in a Harvard research paper. Between 17 September and 1 November 2010 there were:

  • 41,778 Emini trading accounts active
  • Including 30 HFT trading accounts, and
  • The HFT firms accounted for 46.7% of volume traded

You can read the full story here.

The CME has now launched over 40 different “E-mini” and “E-micro” contracts

image of trading volume for the different Emini futures

Trading Volume of the Largest Emini Varieties (monthly)

With the success of the S&P 500 Emini the CME (and other exchanges) decided to launch other “E-mini” and “E-micro” futures contracts covering additional US indices, metals, commodities and forex. 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)
  • S&P Smallcap 600 (symbol SMC)
  • 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)
  • Metals and commodities such as Copper, Gold, Silver, Corn, Wheat, Soybeans, Natural Gas, Crude Oil, Heating Oil and Unleaded Gasoline
  • Forex rates versus the US Dollar such as Euro, British Pound, Swiss Franc, Japanese Yen, Australian Dollar, Canadian Dollar and Chinese Renminbi
  • Options on the S&P 500 Emini and NASDAQ 100 Emini

However, the S&P 500 Emini continues to dominate index futures as the chart above of monthly trading volumes shows. And of the 40+ “E-mini” and “E-micro” contracts, only 10 have daily trading volumes over 1,000 contracts. Given these statistics, I wouldn’t be surprised if the number of “E-mini” and “E-micro” contracts were rationalised in the future.

On this website – and when traders are talking to each other – the word Emini generally refers to the S&P 500 Emini futures contract.

The “mini” ES contract has overtaken the “large” SP contract

image of Emini futures adjusted open interest ES versus SP

Emini Futures (ES) Overtook the “Large” contract (SP) in 2009

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 this chart all the contracts have been adjusted for their relative margin size – so the ES open interest data is divided by 5 so it’s directly comparable with the SP contract, etc.

The trading volume of the “large” (SP) contract has also collapsed. It only trades about 0.5 million contracts a month – equivalent to 2.5 million Emini contracts when you adjust for margin requirements. So less than 10% of the Emini trading volume. Why?

An interesting switch has taken place since the Emini was introduced. The Emini has become the ‘de-facto’ day trading vehicle of professionals and the original “large” SP contract has become a pure position trading and hedging vehicle. This is the exact opposite of what the CME planned, they thought professionals would trade the SP and individual traders would be able to hedge with the Emini. I suppose the many advantages of the Emini were just too attractive for professional traders to ignore.

Emini futures trading hours are 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 4:15pm and 5:00pm for any scheduled maintenance.

Trade is broken into two sessions, the Day session and the After-hours session:

  • Day session trading starts at 8:30am (CST) and closes at 3:15pm
  • After-hours session trading 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.

The Emini ticker symbol is ES plus codes for expiration month and year

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 ticker symbol for an Emini S&P 500 futures contract that expires in March of 2011.

Here are the Emini symbols for 2015:

  • March 2015 contract: ES15H (or ESH15)
  • June 2015 contract: ES15M (or ESM15)
  • September 2015 contract: ES15U (or ESU15)
  • December 2015 contract: ES15Z (or ESZ15)

To make things easier you can also chart a “continuous” contract on most charting platforms. Data providers join together (or concatenate) symbols from adjoining quarters so you can plot a long history of each contract. In TradeStation, the continuous Emini futures contract has a symbol of @ES.

Emini contracts rollover and expire every quarter

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 the far more important date.

Contract rollover 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.

Here are the Emini futures contract rollover dates for 2015:

  • Thursday 11 December 2014: Rollover to the March 2015 contract
  • Thursday 12 March 2015: Rollover to the June 2015 contract
  • Thursday 11 June 2015: Rollover to the September 2015 contract
  • Thursday 10 September 2015: Rollover to the December 2015 contract
  • Thursday 10 December 2015: Rollover to the March 2016 contract

Emini futures do “settle” at the end of each quarter, but most traders have liquidated their positions in the “old” contract and moved onto the “new” contract. If you happen to be holding an Emini futures position at settlement time, your trading account is credited any profit (or debited any loss) on that contract and your position closed out.

Unlike commodity futures like Copper or Crude Oil, physical delivery on settlement doesn’t exist for financial futures contracts like the Emini. Check out this video to understand more about Emini Contract Rollover, Expiry & Continuous Contracts.

Lastly, here’s the Emini futures holiday schedule for 2015

Nothing unusual here. The Emini follows the normal stock market holidays. Here are the dates for 2015:

  • 1 January 2015: New Year’s Day
  • 19 January 2015: Martin Luther King Day
  • 16 February 2015: President’s Day
  • 3 April 2015: Good Friday
  • 25 May 2015: Memorial Day
  • 3 July 2015: Independence Day
  • 7 September 2015: Labor Day
  • 26 November 2015: Thanksgiving Day
  • 25 December 2015: Christmas Day

And you can always find the exact Open and Close times on the CME Group website here.

And a public calendar with important Emini trading dates

If you use Google Calendar, just hit the “+” button (bottom right on the calendar below) and it will import this Emini trading calendar into your personal Google Calendar.

The calendar can also be imported into other calendar applications using these links: iCal format and HTML format. I hope you found this feature article on S&P500 Emini futures helpful.