What is an E-Mini?

E-mini is an electronically traded futures contract that is a fraction of the value of a corresponding standard futures contract. They 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, such as gold, and currencies, such as the euro.

Key Takeaways

  • E-mini is an electronically traded futures contract that is a fraction of the value of a corresponding standard futures contract.
  • E-mini's 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.

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.

The value of the full-sized S&P 500 contract had become too large for most small traders so 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.

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 financial 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).

Because E-minis offer round-the-clock trading, low margin rates, volatility, liquidity and greater affordability, they are ideal trading instruments for active traders.

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 area 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.