Emini Futures S&P 500 and Nasdaq 100 : Basic Trading Info

What are Index Futures?counter party for each trade, hence if you short
Future contracts originate from commodity trading. Afutures, CME will be taking the long position and vice
future contract is an obligation to buy/sell a certainversa.
quantity of commodity at a specific date for a specificNASDAQ 100 Emini contracts is actually one fifth the
price determined at the outset of the contract. Futuresize of their larger counterparts, the NASDAQ 100
contracts are frequently used for hedging risks andindex futures. Each point of the index will represent
also for speculation.$20 and the minimum fluctuation ( tick size ) is 0.5
For example, with the recent hike in oil prices, an airlinepoints which is equivalent to $10.
company which uses a lot of fuel might want to hedgeS&P 500 Emini contracts is actually one fifth the size
it's exposure to oil prices through the purchase of oilof their larger counterparts, the S&P 500 index futures.
futures. If the price of oil is $60 now and is expectedEach point of the index will represent $50 and the
to go up to $70 within 3 months, the airline wouldminimum fluctuation ( tick size ) is 0.25 points which is
hedge its exposure by purchasing the 3 month futureequivalent to $12.50.
contracts so long as the agreed price is less than $70.Globex opens from 16:30(EST) on weekdays and
Oil prices now $6018:00(EST) on Sundays and public holidays. The closing
Expected oil price in 3 mth's time (by airline) $70time is 16:15(EST) on all days. However, there will be a
Price of 3 mth oil contract (by oil producer) $68scheduled maintenance of Globex from 17:30 till 18:00
Actual price 3 mths later $65(Monday through Thursday, nightly). I know the timings
Let's assume the airline can find an oil producer willingcan be quite complicated, however as day traders, we
to sell oil 3 month later for $68, the company wouldare mostly concerned with trading when the market is
enter a futures agreement with this oil producer foropened as we have to capitalize on the higher liquidity
delivery of a certain quantity of oil in 3 month's time. Ifavailable. I do not recommend entering trades after
the price of oil falls to $65, the airline still has tomarket hours, due to low volume which leads to
purchase at the agreed price of $68. But whatslippage. The time span you have to concentrate on is
propelled the airline to enter the futures contract in thereally the market opening hours from 9:30 till 16:15
first place is its expectations of future oil prices going(EST).
up to $70 in 3 months and buying at a price below $70More information regarding the contract specification
(3 months later) seemed reasonable to the company.of the Emini can be found on CME's website.symbols
Index futures are cash settled, there is no physicalfor the S&P 500 and NASDAQ 100 Emini index
delivery of commodity as in the case of wheat, corn,futures
etc. Although index futures can also be held for theBoth the NQ and ES emini contracts have expiry
long term, the time span we are concentrating on is amonths in March, June, September and December
day. We are using the index futures as a vehicle forwhich are denoted by the letters "H", "M", "U", "Z"
speculation and not for hedging as in the case of therespectively. Hence NQ05Z will represent the
airline company.NASDAQ 100 emini contractwith expiry month in
What is the Emini S&P 500 and NASDAQ 100?December 2005. Similarly, ES06H will be the symbol
NASDAQ 100 and S&P 500 index futures is listed onfor an S&P 500 emini contract with expiry month in
the Chicago Mercantile Exchange (CME) and tradesMarch 2006.
on the Globex electronic system. CME acts as the