E-Mini Futures: A Comprehensive Guide to Electronic Trading

What Is an E-Mini?

An E-mini is an electronically traded futures contract that is a fraction of the value of a corresponding standard futures contract. E-minis are predominantly traded on the Chicago Mercantile Exchange (CME) and are available on a wide range of indexes, such as the NASDAQ 100, S&P 500, S&P MidCap 400, and Russell 2000, commodities, and currencies.

Key Takeaways

• E-minis are electronically traded futures contracts that are a fraction of the value of corresponding standard futures contracts.
• E-minis are predominantly traded on the Chicago Mercantile Exchange (CME) and are available on a wide range of indexes, commodities, and currencies.
• The first E-mini contract was based on the S&P 500, was valued at one-fifth of the full-sized contract, and began trading on Sept. 9, 1997.
• Futures contracts detail the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange.
• The most popular E-mini, the E-mini S&P 500, is available on the CME nearly 24/7 from Sunday to Friday, 6:00 pm to 5:00 pm, with a temporary trading halt between 4:15 pm and 4:30 pm.

Understanding E-Minis

All futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset—such as a physical commodity or a financial instrument—at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.

E-minis entered the market when the value of the full-sized S&P 500 contract had become too large for most small traders. The first E-mini contract—the E-mini S&P 500—began trading on Sept. 9, 1997. Its value was one-fifth that of the full-sized contract.

The E-mini made futures trading accessible to more traders. It quickly became a success, and today there are E-mini contracts that cover a variety of indexes, commodities, and currencies. The E-mini S&P 500, however, remains the most actively traded E-mini contract in the world.

E-mini S&P 500 Futures Contract Specifications

The daily settlement prices for the E-minis are essentially the same as those of the regular-sized contract, though they may differ slightly because of rounding (resulting from differences in the minimum tick sizes between the E-mini contracts and full-sized contracts). A position with five E-mini S&P 500 futures contracts—that each trade at one-fifth the size of the full-sized contract—has the same monetary value as one full-sized contract in the same contract month. 

The contract size 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, for example, has a contract size of $50 times the S&P 500 Index. If the S&P 500 is trading at 2,580, the value of the contract would be $129,000 ($50 x 2,580).

Furthermore, this means that a .25 change in S&P 500 index points has a monetary value of $12.50. Trading on the E-mini S&P 500, which has the Globex ticker ES, is available on the CME nearly 24/7 from Sunday to Friday, 6:00 pm to 5:00 pm, with a temporary trading halt between 4:15 pm and 4:30 pm. There are quarterly contracts (Mar., Jun., Sept., Dec.) listed for 5 consecutive quarters.

IRS Form 6781 stipulates that any futures contract traded on a U.S. exchange, foreign currency contract, dealer equities option, dealer securities futures contract, or non-equity options contract are taxed at 60% of the long-term capital gains rates and short-term capital gains tax rates at 40%—regardless of how long the trade was opened for.

Advantages and Disadvantages of E-minis

Because E-minis offer round-the-clock trading, low margin rates, volatility, liquidity, and greater affordability, they are ideal trading instruments for active traders. Perhaps the greatest advantage offered by E-minis is that investors can access the same futures contracts for a fraction, typically 1/5, of the price. Another benefit is that the fees associated with trading E-minis are typically lower than those linked to the buying and selling of regular securities.

As with any financial instrument, however, e-minis also have their downsides. For example, because of their round-the-clock and electronic trading component, the price of e-minis can move very quickly. The behavior of some e-mini traders seems to be more volatile than in other markets. Also, the selection of available e-mini contracts can be limited.

Overall, e-mini futures are a welcome alternative to more expensive full-sized futures.

Affordability

• Low costs

• Nearly 24/7 trading

E-mini market can have more inexperienced traders

• Volatility

• Limited selection of contracts

E-minis vs. Full-Sized Futures

There really is nothing a full-sized contract can do that an E-mini cannot do. Both are valuable tools traders and investors use for speculating and for hedging. The only difference being that smaller players can participate with smaller commitments of money using E-minis.

All futures strategies are possible with E-minis, including spread trading. And E-minis are now so popular that their trading volumes are significantly greater than those of full-sized futures contracts. In fact, the E-mini S&P 500 overtook its larger sibling in trading activity in 2009.

E-mini S&P 500 FAQs

What Is an E-mini S&P 500?

The E-mini S&P 500 is an electronically traded futures contract one-fifth the size of standard S&P futures. Its futures and options are based on the underlying Standard & Poor’s 500 stock index. Consisting of 500 individual stocks representing the market capitalizations of large companies, the S&P 500 Index is a leading indicator of large-cap U.S. equities. The E-mini S&P 500 contract trades under the Globex code ES.

How Much Does an E-mini S&P 500 Contract Cost?

The E-mini S&P 500 trades at one-fifth of the value as that of the full-sized contract. As of May 2021, it is trading at around $4,190.

How Much Money Do You Need to Trade E-mini Futures?

There is no legal minimum on what balance you must maintain to day trade futures, although you must have enough in the account to cover all day trading margins and fluctuations which result from your positions. These can vary by broker however some require as little as $500 to open an account.

What Are the Current S&P 500 Futures?

As of May 2021, the E-mini S&P 500 futures contract is trading at around $4,190.

How Much Is a Micro E-Mini Futures Contract?

As their name suggests, micro e-mini futures offer investors an even cheaper futures contract than e-minis. Whereas the e-mini S&P 500 has a contract price of $50 times the S&P 500 Index, the micro E-mini's contract price is $5 times the Index.