How To Trade E-Mini Futures

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How To Trade E-Mini Futures

E*TRADE gives you access to a wide range of tools and information to help you find and evaluate possible trades.

Futures Research Center

Check out trading insights for daily perspectives from futures trading pros. View futures price movements and trading activity in a heatmap with streaming real-time quotes.

Automated technical pattern recognition

This tool helps you spot developing price swings by automatically populating charts with relevant technical patterns. Learn more about each pattern with just a click.

Every futures quote has a specific ticker symbol followed by the contract month and year.

E*TRADE offers over 60 futures contracts to trade, including market indices, energies, metals, interest rates, currencies, and Bitcoin futures.

Symbol Product
/ES E-mini S&P 500
/NQ E-mini Nasdaq 100
/YM E-mini Dow
/CL Crude Oil WTI
/GC Gold

Micro E-mini contracts are 1/10th the size of an E-mini contract, so you can trade with less up-front capital.

Symbol Product
/MES Micro E-mini S&P 500
/MNQ Micro E-mini Nasdaq 100
/MYM Micro E-mini Dow
/MGC Micro E-mini Gold
/M6E Micro E-mini Euro

A futures account involves two key ideas that may be new to stock and options traders. One is “initial margin,” which is not the same as margin in stock trading. Secondly, equity in a futures account is “marked to market” daily.

Money in your futures account

Watch this short video for details on initial margin, marking to market, maintenance margin, and moving money between your brokerage and futures accounts.

Finding initial margin

You can see the initial margin required for a futures contract under its specifications at the Futures Research Center.

Power E*TRADE lets you efficiently set up trades—including directly from the futures ladder—in both the platform and the app. See how in these short videos.

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It is important to keep a close eye on your positions. Futures accounts and contracts have some unique properties.

Your statement

Futures statements are generated both monthly and daily when there is activity in your account. They show key information like performance, money movements, and fees.

To find your futures statement:

  • Log on to www.etrade.com
  • Click Accounts > Documents > Futures account

Expiration and settlement

All futures contracts include a specific expiration date. Before the expiration date, you can decide to liquidate your position or roll it forward.

If you hold the contract to expiration, it goes to settlement. Learn more in this short video.

More resources to help you get started

Learn more about futures

Check out our overview of futures, plus futures FAQs

Go in-depth

E*TRADE Knowledge has a wide range of articles, videos, and tutorials for new and experienced futures traders alike.

Add futures to your account

Apply for futures trading in your brokerage account or IRA.

Get specialized futures trading support

Have questions or need help placing a futures trade? Call our licensed Futures Specialists today at 877-553-8887.

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How to Trade E-mini S&P Futures

Part 1) Sample Trade

Part 2) Understanding Margin Requirements

Part 3) Market Data Feeds

Part 1: Sample Trade (25% Return on Futures in 1 Day)

We’ve talked about why we trade the S&P500. Here’s a step-by-step guide on how to trade E-mini Futures. In the example above, we use the Interactive Brokers mobile app. But all major brokerages that support options can do the same thing (ThinkOrSwim, E-Trade, TD Ameritrade, etc).

Part 2: E-mini Futures Margin

Each futures contracts eats up about $4-$6k worth of margin in your account – depending on whether you hold overnight or not (past 4:15pm).

Notional value of S&P Index for 1 contract:

So for the cost of $2 in commissions, you can risk $4-$6k of your account to get control of $100k worth of S&P. So if the S&P goes up 1% and becomes $101k — you just made $1k on your

$5k margin investment — that’s a 20% return on capital!

However, note that the opposite can happen too. If the S&P500 is down by 1% and becomes $99k, your $5k becomes $4k and you will effectively be down by 20%. Worse, you could even lose all your $5k AND owe your brokerage additional money if that $100k of S&P that you control dips below $95k on any given day.

With futures – there is daily settlement – so it’s not like in real-estate. In real-estate, if the value of your home goes down by 5%, you don’t have to realize that loss. As long as at the time you choose to sell the house, the house value is above where you bought it, then you are net positive.

This is not the case with futures.

Every day, there is settlement, so if on that first day the value of your $100k worth of S&P dips below margin requirements, you may be forced to liquidate.

That said, given the liquidity of the S&P, as long as you don’t hold your contracts for long periods of time without watching you should be OK. Using stops if you intend to hold for a while may also be prudent to prevent a complete disaster.

The preview window will tell you what the change in initial margin requirement would be for executing a buy on the ES E-mini Futures contract.

As you can see above in the red box, the commission is just $2.

And the initial margin requirement is $2,813.

You can verify this by going to your broker platform and viewing the Margin requirements for the E-mini S&P500 futures security.

As an example, we walk through the Interactive Brokers website:

1) Go to Trading -> Products -> Margin

2) Search for “E-mini” to find the security under CME (Globex)

Margin requirements for E-mini S&P 500 Futures (ES) = $2,812.50 Initial Margin Requirement

Notice this $2812.50 initial margin matches what we initially saw in the screenshot on our order ticket window.

This represents how much of our money or our margin is tied up from holding 1 contract of this E-mini security. Notice that overnight margin is at $5,625 — so roughly twice the amount.

When calculating return on capital for a futures trade, you can potentially use either the $2.8k or $5.6k as your calculation – depending on your needs.

For example, a $1,000 intraday return on 1 contract will happen when you get 20 ES points in your favor and can represent close to $1,000/$2.8k

33% return on your margin.

Part 3: Account Permissions for E-mini Futures

Before you can do any of the above actual trading, you’re going to want to make sure you actually have permissions to trade futures in your account.

Not all brokerages allow you to trade futures. For example, Scottrade does not allow futures. Most other ones do allow.

In this example, we use Interactive Brokers as an example:

Login to Account Management -> Manage Account – > Trade Configuration – > Permissions

Trading Permissions

Under United States row – make sure “Options” and “Futures” are checked.

Part 3) Market Data Feeds

In order to see tick quotes for the E-mini Futures, you will need to subscribe to market data feeds specifically for E-minis (ES).

You would need to subscribe to “CME Real-time” to get quotes for ES (S&P) and NQ (Nasdaq).

For Gold (GC) and Silver (SI), you would need to subscribe to “Comex Real-Time” – to get real-time quotes for those futures contracts.

How to Trade Dow Jones Index Futures

Futures contracts such as the E-mini Dow enable just about anyone to trade or invest in the Dow Jones Industrial Average (DJIA), the most iconic stock index in the world. The Dow tracks 30 blue-chip U.S. stocks from nine sectors, ranging from industrials to health care to consumer staples. The Dow is often considered synonymous with “the stock market,” though the S&P 500 Index, which is comprised of 500 companies, more broadly represents the U.S. equities market.

Futures Trading Basics

A futures contract is a legally binding agreement between two parties in which they agree to buy or sell an underlying asset at a predetermined price in the future. The buyer assumes the obligation to buy and the seller to sell. And the value of the underlying asset—in this case, the Dow—will usually change in the meantime, creating the opportunity for profits or losses.

Some commodity futures contracts still require actual physical delivery of the underlying product in question, such as bushels of corn, but that is not the case with Dow and other financial market futures, which were created to allow traders to easily hedge risk and speculate for profit. They can be settled for cash.

Key Takeaways

  • Dow Jones futures contracts enable just about anyone to speculate on whether the broader stock market will rise or fall.
  • Dow futures contracts can be traded on leverage, meaning you only need to put up a fraction of the value of the contract.
  • Dow futures markets make it much simpler to short-sell the broader stock market than individual stocks.

Trading the Dow With Futures Contracts

Put simply, DJIA futures contracts enable traders and investors to bet on the direction in which they believe the index, representing the broader market, will move. That simplicity, the high trading volumes and the leverage available have made Dow futures a popular way to trade the overall U.S. stock market. About 200,000 E-mini Dow contracts change hands every day.

Using Leverage in Trading

One of the most attractive features of futures contracts is leverage. A trader can buy an E-mini Dow contract for about $5,500—and that futures contract is worth $5 for every point on the DJIA. So if you buy when the index itself is at 29,000, and sell when it hits 30,000, you’ve made $5,000 on the trade, nearly doubling your money.

Beware, though, that leverage cuts both ways, magnifying losses as well as gains. A drop of 1,000 points on the Dow would nearly wipe out your $5,500.

Available DJIA Futures Contract Sizes

There are now two Dow futures contract sizes available. The E-mini, or mini-Dow, contract, as noted above, represents $5 per point on the DJIA. The Micro E-mini is one-tenth the size of the E-mini, and represents 50 cents per point, with a margin requirement of only $550.

Opening a Futures Trading Account

The first step to trading Dow futures is to open a trading account or, if you already have a stock trading account, to request permission from your brokerage to trade futures. Most major brokerages such as E*Trade, TD Ameritrade, and Interactive Brokers offer stock index futures. They generally charge a commission when a position is opened and closed.

Key considerations when choosing a broker are the ease of the trading platform, commission charges, customer service, and features such as news and data feeds and analytical tools such as charts.

Select a Futures Trading Strategy

After selecting a broker and depositing funds into a trading account, the next step is to download the broker’s trading platform and learn how to use it. You don’t want to get caught attempting to make quick trading decisions in a volatile market before you are proficient in using your trading software.

Test your trading strategy before you start risking your hard-earned money.

Once you know your trading platform, select a trading strategy and test it using a demo or trade simulator account. Only begin live trading with real money after you have a strategy that is consistently profitable in simulated trading. This is even more important when trading with highly leveraged instruments such as futures.

Buying Long and Selling Short With Futures

In futures trading, you can buy long or sell short with equal ease. Futures markets aren’t burdened with the same short-selling regulations as stock markets. If you expect the DJIA to go up, buy a futures contract; if you expect the index to decline, sell one short. Take a position in the futures contract trading month you want to trade—the one with the closest expiration date will be the most heavily traded.

Futures Margin Requirements

When you open a position, the broker will set aside the required initial margin amount in your account. To hold the position, you must maintain sufficient capital in your account to cover the maintenance margin. The maintenance margin is lower than the initial margin requirement.

If your account value dips below the maintenance margin level, you will receive a margin call from your brokerage that will require you to liquidate trade positions or deposit additional funds to bring the account back up to the required level.

Closing a Position

Close an open trade simply by entering an opposite order. For example, if you opened the trade by buying five E-mini Dow contracts, you would close the trade by selling them with the same futures contract expiration date. If you opened by selling five contracts short, you would need to buy five to close the trade.

It is also possible to partially close out of a position if you have more than one contract—for example, selling three of five contracts originally bought, leaving a position of two contracts open.

Trading Hours

Unlike the stock market, financial futures trade six days a week, Sunday through Friday, and nearly around the clock.

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