The Big Thing — Micro Futures Trading
The CME Group launched Micro E-mini futures contracts on May 5, 2019 - These contracts allow market participants to gain exposure to price fluctuations in the S&P 500, Russell 2000, Dow Jones 30 and Nasdaq100 indices at a much lower cost than the existing e-mini futures. Depending on which clearing house you use, you can go long or short markets like the S&P500 and Nasdaq100 with as little as $50 of day-trading margin per contract, offering an effective way to hedge your overall portfolio.
Part of the beauty of Micro Futures Trading is that all four of the Micro E-mini futures are 1/10 the size of their respective E-mini futures counterparts. This allows all traders futures exposure without the notional constraints of the larger contracts.
Some things to keep in mind for Micro Futures Contract Trading, is that while a single E-mini S&P 500 futures contract has a value of $50 per each point, the Micro E-mini S&P 500 futures contract has a value of $5 per each point.
While both the Micro E-mini S&P 500 and Micro E-mini Russell 2000 have multipliers of $5, the Micro E-mini Nasdaq-100 has a $2 multiplier, and the Micro E-mini Dow Jones Industrial Average has a 50-cent multiplier.
Example — If the S&P 500 Index is trading at 2750, the notional value of one Micro E-mini S&P 500 futures contract is $13,750.
Similar to the E-mini, the tick increments of the Micro E-mini S&P 500 are quoted in a quarter of one point, a one tick move in the Micro E-mini S&P 500 equates to $1.25. A one-point move, which is four ticks, is worth $5.
This equates to a smaller, more affordable way to access one of the most liquid equity futures in the world.
The tick increment of the other three Micro E-mini contracts vary according to the contract multiplier.
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Micro Futures Contract Sizes
Futures contracts come in three varieties: regular, mini, and micro.
The relationship between these three is as follows:
- Regular = 1
- Mini = 1/2
- Micro = 1/10th
Mini futures are the most commonly traded for indexes, such as the S&P 500 or Nasdaq 100. However micro futures have become increasingly popular across all asset classes including currencies.
Normally, futures contracts control an enormous amount of notional currency. For example, one contract on the U.S. Dollar British Pound Sterling pair controls 62,500 pounds.
Micro currency futures contracts control 1/10th the amount of regular contracts, allowing more flexibility and control while maintaining the same capital efficiency.
With the expansion of micro futures contract trading into currencies, traders can create more comprehensive speculation and hedging strategies across multiple asset classes with different correlations.
