E-mini is a term used in finance to refer to electronically traded futures contracts that represent a fraction—typically one-fifth—of the value of corresponding standard-sized futures contracts. E-minis are traded primarily on the Chicago Mercantile Exchange (CME). As of April 2011, the CME listed 44 unique E-mini contracts, of which approximately 10 had average daily trading volumes of over 1,000 contracts.
Overview
E-mini contracts were introduced to make futures trading more accessible to individual and retail investors by reducing the contract size and margin requirements compared to standard futures. The "E" in E-mini stands for "electronic," reflecting that these contracts are traded exclusively on electronic trading platforms rather than through open outcry in trading pits.
Key Characteristics
- Fractional Size: E-mini contracts are typically one-fifth the size of standard futures contracts. For example, the E-mini S&P 500 has a multiplier of $50 per index point, compared to $250 for the standard S&P 500 futures contract.
- Electronic Trading: All E-mini contracts are traded electronically on CME Globex, allowing for nearly round-the-clock trading—23.25 hours a day from Sunday afternoon to Friday afternoon.
- Liquidity: Many E-mini contracts, particularly the E-mini S&P 500 (ticker: ES), are among the most liquid financial instruments in the world.
- Lower Margin Requirements: Because of their smaller size, E-mini contracts require lower initial and maintenance margins than full-size contracts, making them more affordable for individual traders.
- Tax Treatment: Under U.S. tax law, E-minis may qualify as Section 1256 Contracts, which benefit from a blended tax rate (60% long-term capital gains and 40% short-term capital gains) regardless of the holding period.
Popular E-mini Contracts
| Contract | Ticker | Multiplier | Tick Size | Tick Value |
|---|---|---|---|---|
| E-mini S&P 500 | ES | $50 | 0.25 | $12.50 |
| E-mini Nasdaq-100 | NQ | $20 | 0.25 | $5.00 |
| E-mini Dow ($5) | YM | $5 | 1 | $5.00 |
| E-mini S&P MidCap 400 | EMD | $100 | 0.10 | $10.00 |
| E-mini Russell 2000 | RTY (formerly TF) | $50 | 0.10 | $5.00 |
Symbology
Most E-mini futures expire quarterly in March, June, September, and December. An E-mini futures symbol is formed by combining the root symbol with a letter indicating the expiration month and a digit for the expiration year. For example, the E-mini S&P 500 expiring in December 2012 is designated as ESZ2.
Micro E-mini Contracts
In 2019, the CME introduced Micro E-mini futures contracts, which are one-tenth the size of the standard E-mini contracts. For instance, the Micro E-mini S&P 500 (ticker: MES) has a multiplier of $5 per index point, compared to $50 for the standard E-mini S&P 500.
Risks
While E-mini contracts offer advantages such as high liquidity and lower capital requirements, the use of leverage amplifies both potential gains and losses. Traders can lose more than their initial margin deposit, and the risk of loss is significant.
Options
Options on E-mini contracts are available for certain products, including the E-mini S&P 500 and the E-mini Nasdaq-100.
