Equity Futures

Equity Index Futures Market

Introduced in 1982, equity index futures and options on equity index futures have become increasingly popular. Commonly used by institutional investors and speculators, these contracts allow traders to buy and sell the futures of a basket of stocks. These equity indices are commonly used to show the health of the stock market, which can have an effect on all commodities. Because of this, traders tend to keep an eye on these markets even when they are not trading them specifically.

Due to increased interest in these markets, in 1997 the Chicago Mercantile Exchange (CME) developed the “E-mini” stock index futures contracts. The “E” is indicative of the fact that the contracts can be electronically traded, though they can still be traded on the floor. “Mini” represents that the contract has a smaller multiplier than the original stock index future. It is common for the mini-contract to be one-fifth the size, but this is not always the case. Mini contracts are consider a more retail product as opposed to the institutional investor’s favored larger contracts. In May 2019, CME Group introduced Micro E-mini futures, which feature multipliers 1/10 the size of their E-mini counterparts.

Popular E-mini Futures Contracts

E-mini S&P 500 – The Standard & Poor’s 500 is an index of 500 of the top stocks, which are chosen to adequately show the risk/return characteristics of large market capitalization companies. The stocks are chosen by the S&P Index Committee which consists of Standard & Poor’s analysts and economists. Used to take the temperature of the U.S. stock market and to build financial portfolios, the S&P 500 is constantly monitored and traded. This is the most actively traded stock index futures contract.

E-mini NASDAQ 100 – Created in 1999 this futures contract is one-fifth the size of the NASDAQ-100 Index future. The NASDAQ-100 Index consists of the 100 largest non-financial securities on the Nasdaq Stock Market, domestic and international. The index uses a proprietary algorithm to review its components quarterly and readjusts to meet predetermined criteria. Its holdings include telecommunications, biotechnology, retail/wholesale trade, and computer hardware and software.

E-mini DOW – Started in 2002, this contract trades only electronically on CME Globex. It is one-fifth the size of the Dow Jones Industrial Average, which is an index of 30 U.S. price-weighted, blue-chip companies. Its sectors include technology, entertainment, retail, consumer goods, and financial services. This contract is an easy start for beginners because each tick is only a five dollar price change.

Indices Reports to Watch

• Durable Goods Report
• Consumer Confidence
• Initial Jobless Claims Report

Indices Futures Resources

• Standard and Poor’s
• Nasdaq