As part of the financial futures complex of products within commodities futures, the S&P 500 futures index is one of the most widely traded index commodities futures contracts in the U.S. stock portfolio managers who want to hedge risk over a certain period of time often use S&P 500 Futures to do so. By shorting these contracts, stock portfolio managers can protect themselves from the downside price risk of the broader market.
The Chicago Mercantile Exchange (CME) introduced trading in S&P 500 futures in 1982. The contracts are based on the Standard and Poor's 500 Index (S&P 500), which contains many of the largest companies in the world. Therefore, movement in the direction of the S&P futures is one of the best indicators of overall short-term market direction. The S&P e-mini futures contract was introduced by the CME 1997, after the value of the existing S&P contract (then valued at 500 times the index, or over $500,000) became too large for many small traders.
S&P 500 futures contracts give buyers the right to a basket of the stocks in the S&P 500 on expiration date. Now priced at 250 times the index, they're used mostly by institutional investors with the exception of e-mini futures contracts, which have a lower value and are used by retail investors.
The main reason that S&P futures are so popular for detecting strength is because the contract trades 24 hours a day on financial exchanges around the world. It allows traders and brokers to gauge the futures levels within commodities futures markets before the actual stock markets open.
|Contract Symbol||Contract Unit||Price Quotation|
|ES||$50 per contract||dollars per contract|
|Trading Exchange||Trading Hours||Tick Value|
|CME GLOBEX||17:00 - 16:15||0.5 index points = $50|
Contract specifications are for the E-mini S&P.