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Emini Futures Contract Trading Made Easy

Trading E-mini futures for a living, is it possible?
Below we breakdown what E-mini futures are and how to get started and potentially begin trading E-mini futures to make a living.

Since inception, E-mini trading has grown significantly, with millions of contracts traded daily on electronic platforms around the world. E-mini contracts have become an important part of global financial markets, offering liquidity, flexibility, as well as efficient price discovery.

And in this article we will simplify E-mini futures contracts for you including their background, their benefits, how to go about getting started and discussing if trading E-mini futures for a living is possible. 

But to begin, it’s important to understand what E-mini futures contracts are in order to be able to trade and of course make a profit from them.

When first discovering trading and the possibility of making an income remotely online many investors and newer traders start their trading journey with FOREX, which is understandable given the popularity of trading Forex as a means to make money online. 

But, the forex market is more liquid and also it’s more volatile. E-mini futures trading can be less volatile which allows you more time to react and to make better trader decisions. 

So, it’s safe to say you are interested in e-mini futures and the possibility of  trading E-mini futures for a living so firstly let’s discuss what E-mini futures contracts are.

Emini Futures Contract Trading Strategy

What are E-mini futures?

I have a previous post about what is E-mini futures but here’s a brief definition:

E-mini futures trading is the trading of electronically traded futures contracts, known as E-mini contracts. These contracts are smaller versions of traditional futures contracts and are traded on an electronic trading platform. 

E-mini futures contracts are offered on a variety of underlying assets, including stock market indices (such as the S&P 500, NASDAQ 100, and Dow Jones Industrial Average), commodities (such as crude oil, gold, and natural gas), currencies, and more.

Basically, E-mini contracts let you trade on the future price of different assets without actually owning them. They’re a bit like making a bet on where you think the market is headed, and if you’re right, you can make a profit!

But as always with trading, managing your risks is of utmost importance as well as having a solid foundation in day trading knowledge and market movements.

When Did E-mini Futures Begin?

E-mini trading began in 1997 when the Chicago Mercantile Exchange (CME) introduced the first E-mini contract, the E-mini S&P 500 futures contract. This innovation revolutionized futures trading by offering smaller-sized contracts that were electronically traded and this allowed greater access to a broader range of traders and investors.

I remember talking with some friends about how the price of the S&P 500 was becoming increasingly higher and higher. And this made it more and more difficult for  a regular investor to get in. 

And thus came about the innovation that is the first E-mini contract, the E-mini S&P 500 back in 1997. The e-mini allowed more investors to join the game and made futures trading more accessible. 

Growth in Popularity

The E-mini S&P 500 contract was designed to track the performance of the Standard & Poor’s 500 Index, which represents a diversified portfolio of 500 leading companies in the United States. With its smaller contract size and electronic trading platform, the E-mini S&P 500 futures contract quickly gained popularity among individual traders, hedge funds, and other market participants.

Following the success of the E-mini S&P 500 contract, the CME introduced additional E-mini contracts on various underlying assets, including stock market indices, commodities, currencies, and interest rates. These contracts provided traders with opportunities to access different sectors of the economy and hedge against specific risks.

How to go about trading E-mini futures for a living
E-mini futures contracts and traditional futures contracts share many similarities, but there are also some key differences between the two.

What’s the Difference Between E-mini futures contracts and traditional futures?

E-mini futures contracts and traditional futures contracts share many similarities, but there are also some key differences between the two.

E-mini contracts are smaller in size compared to standard futures contracts. For example, the standard S&P 500 futures contract controls 500 times the value of the S&P 500 index, whereas the E-mini S&P 500 contract controls only a fraction of that value, typically 1/5th or 1/10th.

The “E” in E-mini stands for electronic, so these contracts are traded electronically rather than in open outcry trading pits like traditional futures contracts.

E-mini futures contracts typically have lower margin requirements compared to traditional futures contracts. This allows traders to control a larger position with less capital, providing leverage to amplify potential profits (but also risks).

Also E-mini futures contracts are often more popular among individual traders and smaller institutional investors and many have ‘made it’ through trading E-mini futures for a living. Traditional futures on the other hand are more favored by larger institutional players and professional traders.

Benefits of E-mini Futures Trading

Trading E-mini futures provide several advantages that make them appealing to traders of all levels. And these benefits include:

Liquidity 

E-mini futures markets are incredibly liquid, meaning there are plenty of buyers and sellers ready to make trades. This high liquidity ensures that you can enter and exit positions easily without significant price slippage, even when dealing with large volumes.

Accessibility

E-mini futures make trading futures contracts more accessible to a broader range of traders. With smaller contract sizes and lower margin requirements compared to standard futures contracts, traders with varying levels of capital can participate in these markets.

Diversification 

One of the key benefits of E-mini futures trading is the ability to diversify your portfolio. With contracts available on various underlying assets, including stock market indices, commodities, currencies, and interest rates, you can spread your investments across different sectors of the economy, reducing overall risk.

Lower Margin Requirements 

E-mini futures contracts typically require lower margin deposits compared to standard futures contracts. This means you can control a larger position with less capital, allowing for more efficient use of your trading capital and potentially higher returns on investment.

Related Read: Advantages Of Trading Futures

How do E-mini futures work? Understanding E-mini Contracts

E-mini futures contracts might sound fancy, but they’re actually pretty straightforward once you get the hang of them. 

As explained earlier, the price of S&P 500 got too high for anyone to buy it and that’s where the E-mini futures contract was born.

So essentially E-mini contracts made the S&P 500 more accessible as the E-mini future is a fraction of the price of the original assets. For example, if the S&P 500 is trading for 1200 then the e-mini S&P 500 futures contract will be valued like this: $50 x 1000 = $50.000. That’s how much is e mini futures contract is priced. Every single time the S&P 500 price fluctuates, the same will happen with the S&P E-mini futures price.

E-mini futures contracts are priced based on the value of the underlying asset, like a stock market index or a commodity. For example, let’s say you’re trading an E-mini S&P 500 contract. This contract follows the S&P 500 Index, which represents the performance of 500 big companies in the US stock market. 

So, if the S&P 500 Index goes up, the value of your E-mini S&P 500 contract goes up too, and vice versa. When the contract expires, it’s settled either by delivering the actual asset (which rarely happens) or by cash settlement, where the gains or losses are transferred to your account.

Related Read: Understanding Contract Roll Over Day for ES Minis

Emini price action: Emini Futures Contract Trading
Trading E-mini futures for a living is possible with the correct approach and of course strategy and skill developed over time.

Examples of E-mini Contracts

There are many E-mini contracts out there, but a couple of the most popular ones are the E-mini S&P 500 and the E-mini NASDAQ 100. The E-mini S&P 500 tracks the S&P 500 Index, which is a big deal in the US stock market. It’s like betting on the overall performance of the American economy. 

On the other hand, the E-mini NASDAQ 100 focuses on the NASDAQ 100 Index, which includes some of the biggest tech companies like Apple, Amazon, and Microsoft. So, if you’re bullish on tech, this might be the contract for you!

Micro E-mini futures are a newer addition to the futures trading landscape, introduced by the Chicago Mercantile Exchange (CME) in May 2019. They are smaller-sized futures contracts designed to provide individual traders and investors with more precise exposure to popular stock market indices.

As you can imagine, they are a fraction of the original e-mini contract.

The CME launched the micro E-mini futures in 4 big US stock indices. The popular S&P 500, the NASDAQ-100, DJIA, and RUSSELL 2000.

This gave investors a new way to trade the futures market. Since their price is significantly lower. They are the same but cheaper. The micro E-mini is 1/10th the size of the bigger E-mini.

Advantage of Micro E-mini Contracts

One main advantage of micro e mini contracts is flexibility. Micro E-mini futures offer traders the flexibility to scale their positions according to their risk tolerance and trading objectives. With smaller contract sizes, traders can adjust their position sizes more precisely to manage risk effectively.

Micro E-mini futures provide a cost-effective and accessible way for individual traders and investors to participate in futures markets. And they have quickly gained popularity since their introduction. 

A major benefit is that they cater to the growing demand for smaller-sized futures contracts among retail market participants.

How do the micro E-mini futures work?

Micro E-mini futures work similarly to standard futures contracts but with smaller contract sizes, making them more accessible to individual traders and investors.

Micro E-mini futures contracts are one-tenth the size of their E-mini counterparts. For example, one micro E-mini S&P 500 contract controls $5 times the value of the S&P 500 index, compared to $50 times for a standard E-mini S&P 500 contract. This smaller size allows traders to participate in futures markets with lower margin requirements and reduced capital outlay.

Micro E-mini futures contracts are quoted in index points, with each index point representing a specific monetary value. For example, one index point in the micro E-mini S&P 500 contract is worth $1. The tick size, or minimum price movement, varies depending on the index but is typically 0.25 index points.

When do e mini futures open?

Both micro and e mini futures works the same, fluctuate together, and open at the same time. From Sunday to Friday at 5 p.m CT to 4 p.m working almost 24H.

Recommended Read: Similarities Between Forward And Futures Contracts

Getting Started with E-mini Futures Trading

If you’re ready to dip your toes into E-mini futures trading, there are a few steps involved but keep in mind that the process is relatively simple and not as complex as you may have been led to believe. 

And below we provide a great starting point for anyone looking to get into e-mini futures contracts, to get started.

How to buy E-mini futures?

Don’t get me wrong I asked this question myself too, but it’s really straightforward. To buy or enter any futures position, the investor needs to put up a margin requirement which depends on the broker you will be using.

The first step is to choose a reputable brokerage firm that offers access to E-mini futures markets. Look for a broker with competitive pricing, robust trading platforms, and excellent customer support. Once you’ve selected a broker, you’ll need to open an account, which typically involves completing an application and providing some personal information.

Fund Your Account

After opening your brokerage account, you’ll need to fund it with sufficient capital to start trading. The amount of money you deposit will depend on your trading strategy, risk tolerance, and margin requirements. Be sure to consider how much capital you’re comfortable risking and only trade with funds you can afford to lose.

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Do your Research

Before diving into E-mini futures trading, take the time to educate yourself about the markets and the assets you’ll be trading. Learn about fundamental analysis, technical analysis, and market dynamics. Explore different trading strategies and identify the ones that align with your trading goals and risk profile. The more you know, the better equipped you’ll be to make informed trading decisions.

Develop a Trading Plan

A trading plan is a crucial tool for success in E-mini futures trading. Outline your trading objectives, including your financial goals, risk tolerance, and time horizon. Define your entry and exit criteria, position sizing rules, and risk management strategies. Your trading plan will serve as a roadmap for your trading activities and help you stay disciplined in the face of market volatility.

Manage Risk Effectively

Risk management is paramount in E-mini futures trading. Always use stop-loss orders to limit potential losses and protect your capital. Avoid over leveraging your positions and ensure that your position sizes are appropriate based on your account size and risk tolerance. Additionally, consider diversifying your trades across different assets and markets to spread risk.

By following these steps and taking a disciplined approach to E-mini futures trading, you can set yourself up for success in the dynamic world of futures markets. 

How to Trade E-mini Futures?

By following the basic steps above you can get started in E-mini futures contracts, but the specific trading strategies require a lot more learning, testing and practice!

Really, ‘how to trade E-mini futures’ is the ‘$1million dollar question’ for many obvious reasons and there are many traders looking for examples to trade E-mini futures. 

The good news is there’s a lot of helpful information, tutorials and learning courses available online to help you develop your strategy.

If you’re a total beginner I recommend you to start here.

And while developing strategy is beyond the scope of this article, when it comes to getting started, all you need to trade E-mini futures and micro E-mini futures is knowledge, an account with a reputable broker and a solid trading plan that integrates good risk management and good technical analysis.

What happens when futures expire?

The contracts for futures have an expiration date and when you’re trading you need to be aware of it. This is something you must include in your strategy since an end date can affect the outcome of a trade.

There is a two-term that comes into play here; Contract Expiration and Contract Roll Over.

A Contract Expiration means the end of a contract, it’s the last day an investor can trade that contract. Many futures contracts expire on the third Friday of the expiration month. On the expiration date, traders with open positions in expiring contracts must settle their positions by either offsetting them with opposite trades or allowing them to expire and be settled by the exchange.

Contract Rollover is the option traders have before expiration to ‘rollover’ their positions by closing out their existing contracts and opening new positions in contracts with later expiration dates.

Related Post: Futures Trading Risk Management Tools

When do E-mini futures expire? 

E-mini futures contracts expire on predetermined dates, known as expiration dates. The expiration dates vary depending on the specific contract and the underlying asset being traded. 

Many E-mini futures contracts have monthly expiration dates, typically on the third Friday of the expiration month. For example, the E-mini S&P 500 futures contract expires on the third Friday of the expiration month, which is usually the same day as the expiration of standard S&P 500 futures contracts.

This can happen on the 3rd Friday of the expiration month, but this depends on the contract.

You’ll have three options when it comes to this, the first one is the most common. Offset the positions to close out the trade, rollover the contract, and change the expiration date from the current to the next month. Or leave it as it’s and let the futures contract expire.

Remember to always check your e mini futures expiration dates. 

Trading E-mini futures for a living is possible with the correct approach and of course strategy and skill developed over time.
Micro E-mini futures work similarly to standard futures contracts but with smaller contract sizes, making them more accessible to individual traders and investors.

What time do futures expire? 

Futures contracts typically expire at specific times on their expiration dates, which vary depending on the exchange and the contract specifications. But for general overview of when futures contracts expire, read on below:

For futures contracts traded during regular trading hours, expiration typically occurs at the close of the trading session on the expiration date. For example, if a futures contract trades during regular trading hours from 9:30 AM to 4:00 PM Eastern Time (ET), the contract would expire at 4:00 PM ET on its expiration date.

Some futures contracts trade during extended trading hours, which may include pre-market and post-market trading sessions. In these cases, expiration may occur at the end of the extended trading session on the expiration date, rather than at the close of regular trading hours.

Where can I trade E-mini futures?

You can trade E-mini futures contracts on various futures exchanges around the world and some of the most popular exchanges where E-mini futures are traded include:

The CME Group is one of the largest and most well-known futures exchanges globally. It offers a wide range of E-mini futures contracts, including contracts on stock market indices (such as the S&P 500, NASDAQ-100, Dow Jones Industrial Average), commodities (such as crude oil, gold, and natural gas), currencies, and interest rates.

In addition to standard E-mini futures contracts, the CME Group also offers Micro E-mini futures contracts, which are smaller-sized versions of E-mini contracts. These contracts are designed to be more accessible to individual traders and investors with smaller account sizes.

The Intercontinental Exchange (ICE) is another prominent futures exchange that offers E-mini futures contracts on various assets, including stock market indices, commodities, currencies, and more. Examples of E-mini contracts traded on ICE include the E-mini Russell 2000 and the E-mini FTSE 100.

Also, many online brokerage firms offer access to E-mini futures markets through their trading platforms. These platforms provide traders with real-time market data, charting tools, and order execution capabilities, allowing them to trade E-mini futures contracts directly from their computers or mobile devices. One example of an online brokerage platform is TD Ameritrade.

Conclusion on E mini Futures Contract Trading

As stated earlier, the futures market contract is one of the best places for beginners to start trading and trading E-mini futures for a living is possible if you take the approach outlined in this article. And if you’re a regular trader, you should be adding it to your trading portfolio.

E-mini futures trading is an accessible way to get into trading futures markets that is popular among both individual and institutional traders due to its liquidity, flexibility, and accessibility. And while it is possible to make money by trading E-mini futures for a living it’s always best to start off by simplifying your trading and building more complexity over time as you get more skilled in trading.

And as detailed above in this post the steps to getting started with E-mini futures contracts is relatively simple and straight forward. And while it will take time to develop your skill and knowledge in trading, it’s good to know that the E-mini futures are not something out of the reach of beginners and smaller account traders and investors.

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