About the E-Mini Futures Markets: Nasdaq 100 Futures, Mini S&P 500 Futures, Stock Index Tools and Globex Futures Trading - An Alternative and a Hedge for Stocks Trading
E-Mini Nasdaq 100 Index
The Nasdaq 100 Index is based on the 100 largest non-financial stocks listed on the Nasdaq Stock Market. The Index was created in 1985 with a based value of 250 on February 1 of that year. At the close of business on December 18, 1998, the Index methodology was changed from a capitalization weighted index to a "modified capitalization weighting" index to provide for greater diversification. To ensure that the Index is diversified, the Nasdaq Stock Market will evaluate the Nasdaq 100 Index quarterly. The Nasdaq Stock Market calculates and disseminates the Index under the ticker symbol NDX every 15 seconds during the trading day.
E-Mini Nasdaq 100 Futures
E-Mini Nasdaq 100 futures contracts are legally binding agreements to buy or sell the cash value of the Nasdaq 100 Index at a specific future date. The contracts are valued by multiplying $20 by the futures price. For example, if the E-Mini Nasdaq 100 futures contract is trading at 2100.00, the value of the contract is $42,000 ($20 x 2100.00).
The minimum price movement of the futures, or tick, is 0.50 index points or, $10 per contract. If the futures contract moves one tick, from 2100.00 to 2100.50, a long (buying) position would be credited $10; a short (selling) position would be debited $10. All futures positions are marked-to-market daily. Additional deposits into the margin account may be required beyond the initial balance if your position moves against you. (For an explanation of the mechanics of, and margin requirements for, futures trading at the CME, contact your broker).
E-Mini Nasdaq 100 futures are cash settled, just like the standard Nasdaq 100; there is no delivery of the individual stocks. Likewise, E-Mini Nasdaq 100 daily settlements and quarterly expirations use the same price as the standard Nasdaq 100 futures. Identical daily settlement prices allow Mini contracts to benefit from the liquidity of the Nasdaq 100 futures.
Like the standard Nasdaq 100 futures, which are settled using a Special opening Quotation (SOQ), to the same SOQ on the third Friday of the quarterly contract month. The final settlement price is an SOQ of the Nasdaq Index computed from a five-minute volume-weighted average of each component stock's opening prices on expiration day.
E-Mini S&P 500 Futures and Options
Mini S&P 500 futures and options on futures from the Chicago Mercantile Exchange are small but powerful contracts for the individual investor. Traded virtually around the clock, these contracts are based on the same leading S&P 500 index as the most actively traded stock index contract in the world - S&P 500 futures - but are a fraction of the size. The Mini enables you to participate in and profit from the benchmark index tracked by pension and mutual funds around the country.
With the launch of the Mini S&P 500 in 1997, the CME created the futures industry's first small-order electronic order routing and execution systems. E-Mini S&P 500 contracts are executed quickly and easily, with orders routed through a wide variety of means, including the Internet.
Advantages of Trading Mini S&P 500 Futures and Options
Trading Mini S&P 500 futures and options offers investors several distinct advantages:
ExposureInvestors can gain exposure to the U.S. stock market via the world's leading stock index. Although there are many indexes, some very popular, the S&P 500 is the most closely watched, most actively traded and most liquid of all futures products based on a stock index.
AffordabilityThe enormous appeal of the standard S&P 500 futures has caused the contract to grow beyond the reach of many investors. The Mini S&P 500 contracts allow investors to trade this benchmark index at a fraction of the cost; Mini S&P 500 futures will require much less margin than the standard S&P 500 futures.
OpportunityThese contracts provide a variety of investment opportunities, such as: increasing or hedging portfolio exposure; spreading against other CME index products such as the S&P 500, NASDAQ 100, E-Mini Nasdaq 100, Russell 2000 and/or S&P MidCap 400, a cost-efficient way to benefit from rising or falling equity markets.
IntegrityCME customers and members are protected from default on futures and options contracts by the Exchange's sophisticated risk management and surveillance techniques. The CME Clearing House acts as the guarantor to each of its clearing member, thus ensuring the integrity of all trades. The CME system has proven to the outstandingly effective, even under the most stressful market conditions.
The CME is The Index Exchange, with more than 90% market share of all domestically traded stock index futures and options on futures. Open interest in the CME's index complex totals in excess of $138 billion, making it the world's most liquid trading environment for stock index products.*
Some Facts About the S&P 500 Index
The S&P 500 Index has long been the benchmark by which professional money managers measure portfolio performance. The Index is based on the stock prices of 500 large-capitalization companies and represents a broad cross-section of the U.S. equity market, including common stocks traded on the New York Stock Exchange and the NASDAQ National market System. The Standard & Poor's Corporation designed and maintains the S&P 500 to be an accurate proxy for a diversified equity portfolio.
The S&P 500 Index represents about 70% of total domestic U.S. equity market capitalization.** S&P identifies important industry sectors within the U.S. equity market, approximates their relative importance in terms of market capitalization and then allocates a representative sample of stocks within each sector of the S&P 500.
The Index is capitalization weighted (shares outstanding times stock price); each company's influence on Index performance is directly proportional to its market value. The daily Index values reported in the media are exclusive of dividend income, i.e., they reflect only price action of the underlying component stocks.
* figures from 2001. Market share as of June 2007: 92%.
** figures from 1997.
***SOURCE: CME (Chicago Mercantile Exchange) publications: "E-Mini Nasdaq 100 Futures", "E-Mini S&P 500 Futures & Options" and "How to Get Started Trading CME Index Products."