Advanced Futures Inc.: E-mini S&P 500

Trading the E-mini S&P 500 gives the trader numerous opportunities in the market. Below is a brief explanation of the E-mini, which will give you a starting point to learning its benefits as a trading vehicle. For further learning, be sure to look at the Educational Books and Traders' Resources recommended by our staff.

-What is It?
-Why Trade Them?
-The Case for Trading Futures
-The Case for Trading Futures – Tax issues
-Trading Advantages vs.. Stocks and Options
-E-Mini Contract Specifications
-What is 1 point of the E-mini S&P 500 worth?

What is It? [top]

E-Mini contracts are smaller electronically traded versions of the S&P 500 stock index. They are 1/5 the size of the larger institutional contracts. E-Minis are traded electronically on your PC.

Why Trade Them? [top]

Volatility creates opportunity to earn much more with lower account balances
Broad market exposure for low cost
You can hedge against your own portfolio
You can be profitable regardless of market direction
Tax advantage compared to stocks

The Case for Trading Futures: The Traders Have Voted! [top]

In a little over 4 years, since inception, average daily volume of the E-mini S&P 500 has grown from 11,000 contracts to nearly 240,000 contracts.

The Case for Trading Futures – Tax issues [top]

Future are generally traded more favorably and receive “60/40” treatment. Equities require a longer holding period for favorable tax treatment.

Example:

Trader “A” makes $10,000 in profits over 1 week trading Intel
Trader “B” makes $9,800 in profits over 1 week trading E-minis
Which trader would you rather be? (assuming 39.6% bracket)

Trader “A”

pays IRS $10,000 x .396

= $3,960

Trader “B”	pays IRS $9,800 x .60 x.20	= $1,176
	plus pays IRS $9,800 x .40 x .396	= $1,552

	60/40 blend results in tax rate of 27.8% or	= $2,728
	Tax Savings	=$1,232

Trading Advantages [top]

Ease of use versus stocks:

Totally electronic platform with fast, efficient fills and virtually 24-hour trading
“Round Trip” versus in-and-out commission
Monitoring a few key indexes vs. dozens of stocks thus eliminating traditional stock picking and associated risks such as:
- Pre-announcements
- and now…accounting minefields
Excellent profit potential

Ease of use versus options:

Rocket Science Factor
Options traders can call market correctly and still lose money because they must juggle 4 items:
- underlying price
- strike price
- volatility
- time decay
Futures traders care about only 2 things:
- an advancing market or
- a declining market.
Futures have more constant order flow and are usually much more friendly regarding bid/offer spreads.

E-Mini Contract Specifications [top]

E-mini S&P 500 E-mini Nasdaq-100 E-mini Russell 2000 E-mini S&P Mid Cap 400

Ticker Symbol ES NA ER2 EMD

Contract Size $50 x E-mini S&P Futures price
$55,000 20 x E-mini Nasdaq-100 Futures price
$30,000 $100 x E-mini Russell 2000 Futures price
$49,000 $100 x E-mini Mid Cap 400 Futures price
$55,000

Min. Price Fluctuation (Tick) .25 futures index points = $12.50 .50 futures index points = $10.00 .10 futures index points = $10.00 .10 futures index points = $10.00

Trading Hours Virtually 24 Hours Virtually 24 Hours Virtually 24 Hours Virtually 24 Hours

Contract Months* H, M, U, Z H, M, U, Z H, M, U, Z H, M, U, Z

Last Day of Trading 8:30AM 3rd Friday of contract month 8:30AM 3rd Friday of contract month 8:30AM 3rd Friday of contract month 8:30AM 3rd Friday of contract month

Performance Bond Initial ** $3,938 $4,125 $4,350 $3,125

Performance Bond Maint. $3,150 $3,300 $3,480 $2,500

*H=March, M=June, U=Sept, Z=Dec
** CME minimum performance bond margins as of 1/31/02 SUBJECT TO CHANGE

What is 1 point of the E-mini S&P 500 worth? [top]

$50 per point per contract

For example: if the S&P 500 Index value is at 1500 and goes up 5 points to 1505 the difference is 5 points which equals $250.

$50 x 5 = $250 profit or loss per contract.