An "e-mini" is an electronically traded futures contract that represents a portion of a standard futures contract. As futures contracts, the e-minis represent an agreement to buy or sell the cash value of the underlying index at a specified future date. The contracts are sized at a certain value multiplied by the futures price; this value depends on the particular e-mini. The e-mini S&P 500, for example, has a contract size of $50 times the e-mini S&P 500 futures price. If the value of the e-mini S&P 500 is $1,320, the value of the contract is $66,000 ($50 x $1320). The value of the contract changes as the price of the futures moves.
Mini contracts are available on a range of products, including indexes, metals, forex and commodities. Generally, however, investors and traders are referring to the e-mini stock index futures - and in particular, the e-mini S&P 500 - when discussing "e-minis."
A stock index is a statistic that reflects the composite value of a selected group of stocks. The S&P 500, for example, is an index comprised of 500 stocks chosen for market size, liquidity and industry grouping. The Dow Jones Industrial Average, on the other hand, is an index made up of 30 of the largest and most influential companies in the United States. Stock index futures allow traders to buy and sell the strength of an entire cash index without having to own every individual stock, making them a practical trading instrument. Each stock index future trades on a multiple of the underlying cash index, and because they are not based on a tangible commodity, they are settled in cash.
The Chicago Mercantile Exchange (CME) introduced the first e-mini product on Sept. 9, 1997 when it launched the e-mini S&P 500. This smaller cousin of the S&P 500 enabled more participation in the stock index futures markets because it traded at one-fifth the size of the full-sized contract, making it much more affordable to individual investors and traders.
The daily settlement prices for the e-mini contracts are the same as the regular-sized contract (based on contract month). As a result, 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 financial value as one full-sized contract in the same contract month (assuming both positions are on the same side of the market).
The most popular e-mini stock index futures contracts include the:
- E-mini S&P 500 (ES)
- E-mini NASDAQ-100 (NQ)
- E-mini Dow (YM)
- E-mini S&P MidCap 400 (EMD)
- E-mini Russell 2000 (TF)
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