Updated: Jan 24
What are E-Mini E&P 500 Futures? The E-mini S&P 500 is a futures contract that shadows the S&P 500 stock market. It is traded electronically on the Chicago Mercantile Exchange. The ES contract size is one-fifth of the S&P 500 market- 1 tick of the ES is $12.50 making a point $50.00. The E-Mini S&P 500 is the most traded of all the E-minis by far and one of the top traded markets in the world overall.
E-Mini S&P 500 Highlights
No up-tick rule: You won’t have to jump through hoops to buy or sell. Entering and exiting a long position or short position is easy to do.
Affordability: Unlike the markets in which it shadows the E-mini S&P 500 is more attractive to retail traders because of the $12.50 tick size.
High Volume and Manageable Volatility: The ES is traded by a variety of traders including: Managed funds, High Frequency Trading firms as well as retail traders. This gives the market very good Volatility that is still manageable for smaller retail traders.
Fair trading: The ES is traded on the Globex platform which gives retail traders with smaller accounts a fair chance at trading the market. Trades placed on the ES don’t prioritize different types of accounts, so orders are placed in a first come first serve basis.
Less Tax Heavy: Trading E-mini futures you only need to report your net profit for that year, instead of each trade.
Low Margin Requirements: Even traders with smaller accounts around $5000.00 can participate in trading the ES. What moves the E-Mini S&P 500 market Its important to understand that the E-Mini S&P 500 is based off of the Standard & Poor’s 500 Index. This index is comprised of the top 500 largest U.S. publicly traded companies based off market value. The 500 companies are comprised of large companies from various sectors such as: Health care, Financials, Industrials, Utilities, Communications, Real Estate, Energy, Consumer goods, Biotech, Agriculture and Various Technology sectors. This means that numerous economic events can introduce volatility to the market, this is one of the reasons the ES is so volatility and what makes it one of the most attractive and challenging markets to trade.
For this reason, you’ll want to keep track of the important economic reports across all sectors. The following are reports and events you want to watch out for:
Unemployment Reports: This affects the Fed Policy’s and reflects the strength of the economy.
Inventory Reports: The S&P includes oil and gas giants like Chevron Corp. and ConocoPhillips. Watch for reports and events that effect the supply and demand of oil and gas such as the Crude Oil inventory report that is released weekly by the EIA (Energy Information Agency)
Production Reports: The Federal Reserve releases a report monthly on the industrial production. This includes the raw amount of goods produced by industrial methods such as factories, mines and utilities companies. The Feds watch this closely as it’s an early sign of how the economy is doing.
Non-Farm Payroll: A report issued monthly showing changes in payroll of all jobs in the U.S. excluding farm workers, private household employees and non-profit organizations.
CPI (Consumer Price Index): Issued by the U.S. Department of Labor, this Monthly release shows inflation through the average price of goods and services the general public consumes. This includes food, automotive fuel and Medical Care.
FOMC: The Federal Open Market committee holds regular meetings throughout the year. The report covers a huge range of data, including Economic Projections and lowering or increasing interest rates. An FOMC meeting will almost always cause a stir across all markets, especially in the E-Mini ES. You’ll want to be aware of your position during an FOMC meeting as volatility will usually be sporadic. Many retail traders usually steer clear of entering the market during an FOMC meeting.
Comparison: S&P 500 Index is much more diversified index compared to the NASDAQ or DOW. While Nasdaq contains both large and mid-cap stocks the S&P only contains large-cap stocks.
Conclusion The E-Mini S&P 500 is one of the most popular markets among retail traders. With it’s tick size of $12.50 and almost consistently good volume lets even small account traders take profit with just a few points of movement. Unlike trading commodities such as Crude Oil, you’ll want to pay attention to economic events that can affect all sectors of the economy, since the ES comprises of many different sectors of the economy. Finally, traders with small accounts and/or beginning traders may want to steer clear of the trading the ES during major economic events like the FOMC meetings because volatility will be high and often unmanageable.