E-Mini S&P 500 (ES) Futures: An Introduction

E-Mini S&P 500

The E-Mini S&P Future (ES), often referred to simply as the “E-Mini”, is a stock market index futures contract traded on the Chicago Mercantile Exchange’s Globex electronic trading platform. It is one of the most popular equity index futures, and its inception in 1997 coincided with the rise of electronic trading and the growth of online brokers.

The E-Mini is based on the Standard & Poor’s 500 Index (S&P 500), which is a capitalization weighted index of 500 large cap stocks from a variety of sectors.

The E-Mini contract was created in response to lower commission rates offered by online brokers and the need for a smaller contract size that would be more accessible to individual investors.

Unlike the full-sized S&P 500 futures contract, which has a notional value of $500,000, the E-Mini contract has a notional value of only $50,000. This makes it much more accessible to individual investors and traders who may not have the capital required to trade the full-sized contract.

The E-Mini is popular among day traders and swing traders due to its high liquidity and tight bid/ask spreads. It is also popular with institutional investors who use it for hedging purposes or as part of a broader index arbitrage strategy.

ES Contract Specifications

The ES contract is a 1-day delivery contract for the E-mini S&P 500 futures traded on the CME Globex electronic trading platform. The tick size for the ES is 0.25. Ticks per point: four, making each point worth $50 per contract. The minimum price fluctuation is $12.50 per contract.

The daily trading hours for the ES are from Sunday 5:00 p.m. CT – Friday 4:15 p.m. CT with a 45-minute break each day from 4:15 p.m. – 5:00 p.m. CT.

Trading in the ES is conducted in U.S. dollars and all profits or losses are denominated in U.S. dollars.

The ES is a cash-settled contract and settlement is based on the official closing. Margin requirements may be changed at any time by the CME Group in order to maintain adequate market liquidity or to protect against price volatility.

Trading in the ES contract is subject to position limits which are set by the CME Group. Currently, the position limit for the ES contract is 5,000 contracts net long or short per account. Positions that exceed these limits may be subject to liquidation by the exchange.

The last trading day for the ES contract is the third Friday of the contract month. If the third Friday is an exchange holiday, then trading will cease on the Thursday before expiration. The expiration date for the ES contract is also the last trading day.

Delivery of the underlying index constituent stocks does not take place with this contract. Rather, cash settlements are made between clearing members at the expiration of each contract month. Clearing members are responsible for making sure that all trades are settled in a timely manner.

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