What Is Emini Trading

What is an E-Mini?

Emini Trading is the act of buying and selling emini futures contracts. There are several types emini contracts, based on different indexes. In this blog post we’ll refer to S&P emini contracts. Before answering the question “what is emini trading” we first should define “what is an emini”. Emini, sometimes spelled e-mini, is a futures contract based on the S&P Index. This index is a calculation based on the market value of the 500 stocks that are included in the index. The emini is a futures contract representing a fraction of the value of the S&P futures contract. Its value rises and falls with the S&P index.

As a tradeable security, each emini futures contract has a value of $50 times the S&P index. So if the index is at 3000, each emini contract represents a basket of stocks worth $50 X 3000 = $150,000. S&P e-mini futures contracts are traded on the Chicago Mercantile Exchange (CME) and are available through various brokers. In this blog post, the discussion is about the S&P emini contract, although other types of emini contracts exist, based on different indexes.

 S&P Emini Contract Ticker Symbol

To further answer the question “what is emini trading”, we need to know the emini ticker symbol. In this article, we’re talking about the S&P emini futures contract. The E-mini contract has a ticker symbol of “ES”, plus a letter representing the expiration month. The contract expires every quarter on the 3rd Friday of March, June, September and December. Each expiration month is denoted by an “H”, “M”, “U” and “Z” respectively. To illustrate, the March emini futures contract is has a symbol of ESH and expires on the third friday of March. The trader should then begin trading the June contract, designated as ESM.

Before the current contract expires, trading rolls over into the next quarter’s contract on the rollover date. Rollover dates are one week before the expiration date. Those occur on the 2nd Thursday of March, June, September, and December. Emini traders should begin trading the new contract on the rollover date.

Of the two dates; rollover and expiration, the more important one to be aware of is the rollover date because the majority of trading, hence volume and liquidity, moves to the next contract.

What is Emini Trading?

Emini traders typically purchase contracts on margin. Futures margin is somewhat different than margin for buying stocks. Each futures broker sets the margin requirement to purchase a contract. One broker, for example, has an initial margin requirement of $5,060 to purchase an S&P E-mini futures contract.

Margin for purchasing eminis gives the emini trader huge leverage. Since the value of each contract is $50 X the index, a contract purchased for $5,060 controls securities worth $150,000 ($50 X 3000).

Therefore, a trader would be able to hold $150,000 worth of stock for only $5,060/contract (initial margin) or 3.37% of the full cash value.

Emini trading offers an opportunity to profit by investing a small amount of money to control a much higher value asset. For each point the S&P index moves, the emini trader can profit (or lose) $50, and that is what makes emini trading so popular, especially among day traders.

There are other advantages to emini futures trading over stocks. Trading futures even offer tax advantages over stocks. Profits earned from futures trading is taxed at a lower amount. There are other reasons to trade eminis beyond the obvious margin and tax advantages, but these are some of the answers to the question of “what is emini trading”.