Emini Futures S P 500 And NASDAQ 100 Basic Trading Info
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Emini Futures: S&P 500 and NASDAQ 100 Trading Essentials
Understanding Index Futures
Index futures have their roots in commodity trading. These contracts oblige the buyer or seller to purchase or sell a particular commodity quantity at a predetermined price on a specific future date. They serve two main purposes: risk hedging and speculation.
A Practical Example
Consider an airline faced with rising oil prices. If oil is currently $60 per barrel and projected to increase to $70 in three months, the airline might hedge its risk by purchasing futures contracts. Suppose the airline secures a contract to buy oil at $68 in three months, even if the price drops to $65, the airline still pays $68. They initially entered the contract expecting prices to rise to $70, making a $68 price favorable.
Index Futures: Cash Settlement
Unlike commodities like wheat or corn, index futures are cash-settled, meaning there's no physical delivery. We're focusing on short-term trades, using index futures for speculation rather than hedging, as in our airline example.
Emini S&P 500 and NASDAQ 100 Futures
The NASDAQ 100 and S&P 500 index futures are traded on the Chicago Mercantile Exchange (CME) via the Globex electronic system. The CME acts as the counterparty to every trade, balancing positions.
Emini Contracts
- NASDAQ 100 Emini:
- One-fifth the size of standard NASDAQ 100 futures.
- Each index point equals $20.
- Minimum fluctuation (tick size) is 0.5 points, worth $10.
- S&P 500 Emini:
- One-fifth the size of standard S&P 500 futures.
- Each index point equals $50.
- Tick size is 0.25 points, worth $12.50.
Trading Hours and Strategy
Globex operates from 4:30 PM EST on weekdays and 6:00 PM EST on Sundays and holidays, closing at 4:15 PM EST daily. Note that there is a maintenance break from 5:30 PM to 6:00 PM EST from Monday to Thursday. Day traders should focus on market hours, 9:30 AM to 4:15 PM EST, to capitalize on liquidity and minimize slippage. Trading outside these hours is not advisable due to lower volumes.
Contract Specifications and Symbols
For complete contract details, visit the CME website. The Emini S&P 500 and NASDAQ 100 futures have expiry months in March, June, September, and December, represented by the symbols "H," "M," "U," and "Z," respectively. For instance, "NQ05Z" refers to a NASDAQ 100 Emini contract expiring in December 2005, and "ES06H" corresponds to an S&P 500 Emini contract expiring in March 2006.
Expiry Symbols:
- March: H
- June: M
- September: U
- December: Z
By understanding these fundamentals, traders can better navigate the world of Emini futures, leveraging them for strategic speculation and informed trading.
You can find the original non-AI version of this article here: Emini Futures S P 500 And NASDAQ 100 Basic Trading Info.
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