E-mini S&P 500 Options

Save

E-mini futures are electronically traded futures contracts. The E-mini S&P 500 futures are widely used by traders to take positions on the S&P 500 stock index and the direction of the stock market. The E-mini S&P contracts trade on different exchanges than stocks, and trading works differently than for stocks.

E-mini S&P 500 Contract Specifications

  • One E-mini S&P 500 futures contract is valued at 50 times the current level of the S&P 500 stock index. For example, if the stock index is at 1,320, one E-mini contract has a value of $66,000. The minimum value change on the contract -- called a "tick" -- is 0.25 index point. This makes one tick worth $12.50 in this case. If the S&P 500 changes by one point, the E-mini contract value changes by $50. E-mini S&P 500 futures have expiration dates in March, June, September and December. Expiration is at 7:30 a.m. on the third Friday of the month.

E-mini S&P 500 Options

  • Three types of put and call options trade against the E-mini S&P 500 futures contract. Each put or call option is for one E-mini futures contract. The American-style options expire with the specified futures contract. Contracts which expire at the end of the month and an additional type of contracts which expire at the end of the week are European-style options. An American-style option can be exercised by the option holder at any time until expiration. European-style options are only exercised at expiration. All option types exercise into a single E-mini S&P 500 futures contract.

Trading Considerations

  • Trading the E-mini contract directly requires a trader to put up a margin deposit for each contract traded. Futures trades can be opened in either direction, a buy trade to profit from an increasing index value or a sell trade if the index is expected to decline. The position gains or loses from the first tick change away from the entry price. With options, call options are purchased to profit from a rising futures value and put options for an expected drop in value. The futures price must change by the amount paid for the option contract before an option position is profitable.

Trading Risks

  • The maximum risk from purchasing option contracts is limited to the premium paid for the contracts. The premium paid will be significantly less than the margin deposit required to trade the futures contract. Options also incur the risk that the futures value will not change enough to cover the option cost before the expiration date, leaving the trade at a loss. The risk of loss from trading the futures directly is not limited. If the futures value moves too far in the wrong direction, the trader may be required to provide additional money to maintain the required level of margin deposit.

References

  • Photo Credit lukas_zb/iStock/Getty Images
Promoted By Zergnet

Comments

You May Also Like

  • How to Trade Futures & Options

    Trading futures and options on the major commodity and stock exchanges is fun and not too complicated, and can be very profitable....

  • How to Calculate Stock Basis for Exercised Options

    It is important to know how to calculate stock basis for exercised options in order to be able to determine the amount...

  • How to Trade E-Minis

    E-mini futures contracts provide a low-cost entry into futures trading. In addition to being more accessible to a wider group of investors,...

  • How to Hedge With Stock Index Futures

    The most important duty of a professional investment manager is to avoid losing her clients' money. For a portfolio manager, avoiding losing...

  • How to Trade ES Futures

    ES is the ticker symbol for the e-mini S&P 500 futures contract. The e-mini S&P 500 futures contract is a popular choice...

  • How to Trade SPY Options

    Trading options can be a great way to mitigate risk and profit substantially, without having to put out tremendous amounts of money....

Related Searches

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!