If you ask any professional out there about E-mini futures, they will probably tell you that it is the biggest, and perhaps the most important trading vehicle on the globe. In fact, hundreds of thousands of traders in the past few years have abandoned old tactics such as regular stock trading in favor of E-mini S&P 500, the most popular of all E-minis.
When did E-mini Futures Get Started?
More than 20 years ago, the Chicago Mercantile Exchange introduced the first E-mini S&P contract in an effort to get more people involved in futures trading. This futures contract was actually created at one-fifth the size regular contract, which was valued at 500,000 dollars at the time.
A few years later, the E-mini S&P contract was split two-to-one, valuing it at 250,000 dollars. And today, the situation is much different. At the moment, E-minis are the biggest trading vehicle, with a volume of more than 100 billion dollars.
What are the Requirements for E-Minis?
Recently, e-mini margins have been slashed to as low as 400 dollars per contract during the day and 2000 during overnight periods. Because of the last economic crisis, margins have been increased in the last few years.
Of course, in future markets, the margin is not fixed and can change depending on the volatility of a certain market. Margins, however, don’t change on a daily basis – they are actually monitored periodically.
When price deviation starts to rise steadily over a certain period of time, it can result in an increase of margin requirements from the exchange or your broker. But you can rest assured knowing that any margin changes are communicated well ahead of time.
Futures exchanges will also increase margin requirements in anticipation of important market events that can influence the volatility. In most cases, the margin requirements will change due to events like:
- Sudden changes in supply and demand
- Shifts in fiscal policy
- Various natural disasters
- Global geopolitical events
Why Should You Start Trading E-Minis?
Now, let’s look at some of the biggest reasons why people decide to trade E-mini futures:
- The margins are pretty low
- Non-extensive tax reporting requirements
- Trades can be made almost 24-hours per day
- E-mini brokers usually charge very small commissions
- High liquidity allows people to trade as many contracts as possible
- There are no Short Selling requirements that restrict trading in the stock market
We should also note that if you’re a beginner who wants to start day trading, it would be wise to start with E-mini futures, because they don’t require too much investment and they are pretty low-risk. Also, most people consider the original, E-mini S&P 500 contracts to be the best for newbies.
Why People Choose the E-mini S&P 500?
Today, the E-mini ES is one of the most popular futures contracts. It provides a great mix of fluid movement and great volume, so naturally, it became one of the cornerstones of futures trading in the world. In most cases, people opt for the ES for some of the following reasons:
- They are easy to learn on and even easier to trade
- There’s little to no erratic movement on the market
- It’s fantastic for people who are just starting to trade
It has four ticks to every point, and is worth 5o dollars per point or 12.50 dollars per tick. This means, if you manage to buy a contract for 1000 dollars and sell it for 1001, you’ll have a 50-dollar profit. At the same time, if you buy a contract for 1000 dollars and sell if at 1000.50, your profit will be 25 dollars.