What is the standard S&P 500 futures contract?
S&P 500 futures are a type of derivative contract that provides buyers with an investment price based on the expectation of the S&P 500 Index's future value. Investors and the financial media follow them closely because they act as an indicator of market movements.
| Last | Low | |
|---|---|---|
| E-Mini S&P 500 Future Jun 2024 | $5,073.75 | $5,062.00 |
| E-Mini S&P 500 Future Sep 2024 | $5,131.00 | $5,119.50 |
| E-Mini S&P 500 Future Dec 2024 | $5,186.25 | $5,175.00 |
| E-Mini S&P 500 Future Mar 2025 | $5,242.50 | $5,242.50 |
A futures contract is a legally binding agreement to buy or sell a standardized asset on a specific date or during a specific month. Typically, futures contracts are traded electronically on exchanges such as the CME Group, the largest futures exchange in the United States.
The contract size of an E-mini is the value of the contract based on the price of the futures contract times a contract-specific multiplier. The E-mini S&P 500 has a contract size of $50 times the value of the S&P 500. 2 So, if the S&P 500 is trading at 2,580, the value of the contract would be $129,000 ($50 x 2,580).
An option on an S&P 500 futures contract gives a trader the right, but not the obligation, to buy or sell the underlying futures contract at a certain price by an expiration date.
With E-mini S&P 500 futures you can trade nearly 24 hours a day during the trading week and take advantage of potential trading opportunities regardless of market direction. E-mini S&P 500 futures also provide the ability to trade with greater leverage and can allow a more efficient use of trading capital.
To apply for futures trading approval, your account must have: Margin approval (check your margin approval) An account minimum of $1,500 (required for margin accounts.) A minimum net liquidation value (NLV) of $25,000 to trade futures in an IRA.
Future contracts have numerous advantages and disadvantages. The most prevalent benefits include simple pricing, high liquidity, and risk hedging. The primary disadvantages are having no influence over future events, price swings, and the possibility of asset price declines as the expiration date approaches.
The most traded futures contract globally is E-mini S&P 500, with a daily trading volume averaging at 1.6 million contracts. The CME Group's WTI crude oil futures contract is among the most liquid futures contracts worldwide, with a daily trading volume of approximately 1.2 million contracts.
Rule of 20: Stocks are considered fairly valued when the sum of the S&P 500 forward P/E ratio and the year-over-year change in the consumer price index (CPI) is equal to 20 (or inexpensive when it's below 20).
How much is 1 S&P contract?
| Barchart Symbol | ES |
|---|---|
| Exchange Symbol | ES |
| Contract | E-Mini S&P 500 Index |
| Exchange | CME |
| Tick Size | 0.25 points ($12.50 per contract) |
Micro E-mini futures contract specifications. S&P 500 futures: 0.25, worth $1.25 per contract. NASDAQ-100 futures: 0.25, worth $0.50 per contract. Dow Jones futures: 1.00, worth $0.50 per contract.
While the S&P 500 Index is based on the cash price of stocks being traded within the benchmark, the S&P 500 futures reflects expectations of the future value of the index, which makes it a leading indicator for the U.S. stock market outside normal trading hours.
In contrast, equity index futures contracts, such as those based on the S&P 500, are "cash settled," meaning a cash position is transferred between the buyer and seller.
SPX Cash Index: The SPX Cash Index is traded during regular U.S. stock market hours, typically from 9:30 AM to 4:00 PM Eastern Time. It does not offer 24-hour trading. S&P Futures: S&P Futures provide continuous trading opportunities 24 hours a day, five days a week.
It is also referred to as e-mini because it is a part or a fraction of the total value of an underlying standard futures contract, hence the name e-“mini.” Hence, when a standard futures contract is broken down into various smaller parts, the fractional values of the total value of a standard futures contract is an e- ...
How Many E-mini Contracts Can I Trade? 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.
As of December 2022, the initial margin for one Micro E-mini Nasdaq-100 futures contract was $1,825 compared to $18,250 for the E-mini Nasdaq contract.
Some small futures brokers offer accounts with a minimum deposit of $500 or less, but some of the better-known brokers that offer futures will require minimum deposits of as much as $5,000 to $10,000.
This can be a risky form of trading, but it also has the potential to generate large profits. If you are starting with a small amount of capital, such as $10 to $100, it is still possible to make money on futures trading.
Do you need 25k to trade futures?
Minimum Account Size
A pattern day trader who executes four or more round turns in a single security within a week is required to maintain a minimum equity of $25,000 in their brokerage account. But a futures trader is not required to meet this minimum account size.
Futures contract example
You can enter into a futures contract to sell a specific quantity of wheat at a fixed price to a buyer, say, six months from now. If the price of wheat falls below the contract price when the contract expires, you benefit because you get to sell your wheat at a higher price.
- Understand how futures trading works.
- Pick a futures market to trade.
- Create an account and log in.
- Decide whether to go long or short.
- Place your first trade.
- Set your stops and limits.
- Monitor and close your position.
Futures are standardized and traded on regulated exchanges, making them highly transparent and liquid. Futures trading involves leverage and margin requirements, which can amplify both profits and losses.
After establishing a futures position, the primary decision you will make is when to close the position. To close an open position, you can take the opposite position in the same futures contract you are currently holding in your account.
