Traders and investors from every corner of the globe consider the Standard & Poor’s 500 (S&P 500) as an ideal way of engaging the broader U.S. equities market. In response to the public interest, the Chicago Mercantile Exchange (CME) offers S&P Emini futures to individuals wanting to take their shot at one of the premier equities products in the world.
Alongside the Dow Jones Industrial Average (DJIA) and NASDAQ, the S&P 500 is a preferred destination for traders and investors alike. First published in 1957, it’s a weighted index based on the stock price of 500 large-cap companies listed on U.S. exchanges. The S&P 500 includes components from 75% of the aggregate U.S. equities market, earning it a reputation as being a “total market proxy.”
The S&P Emini futures (ES) contract listed on the CME captures the spirit of the S&P 500’s large-cap stability while providing traders with several advantages over traditional stock trading. Here are five of the biggest benefits — each a great reason to become involved in this exciting market.
If you’re searching for ways to boost your trade-related efficiency, then look no further than S&P Emini futures. Daily traded volumes regularly exceed 1 million on the front-month contract, ensuring maximum liquidity and a robust depth-of-market. As a result, adverse factors such as slippage are minimized, and efficient trade is promoted.
For many active traders, the availability of leverage is a critical aspect of conducting day-to-day business. Emini S&P 500 futures provide purchasing (or shorting) power on a much larger scale than in traditional stocks. With intraday margin requirements as low as $500 per contract, the Emini S&P 500 offers participants the opportunity to take sizeable positions with only a fraction of the capital required by equities products.
The contemporary digital marketplace has given retail traders from all walks of life an ability to participate in the world’s most popular markets. Modest margin requirements, reduced commissions/fees, and remote exchange connectivity are a few reasons why legions of professional traders turn to futures instead of engaging indices or stocks directly. If you have a bit of risk capital, computing power, and an internet connection, then the odds are very good that you will be able to trade S&P Emini futures.
In contrast to stocks, futures afford the trader superior strategic flexibility. You can profit from being either long or short the market, as well as buying or selling contracts frequently. Naked shorting or high volume strategies are typically off-the-table in conventional equities trading unless you’re well-capitalized and privy to unique brokerage service.
Futures products are priced with respect to what an asset’s value is perceived to be at an upcoming point in time. Accordingly, prices regularly exhibit sensitivity to vast array of factors. Breaking news items, economic events, and contract expiration are all capable of influencing the process of price discovery and heightening periodic volatilities.
The public nature of the S&P 500 ensures consistently high levels of participation and, in turn, enhanced volatility. Subsequently, traders are able to capitalize on significant swings in Emini S&P 500 pricing on a near-daily basis.
For more than 50 years, the S&P 500 has been a staple of American finance. It’s viewed as being a benchmark of U.S. stock market value, as well as a ripe target for active traders.