Why you should trade micro e-mini futures

The micro e-mini futures is an attractive new investment that any small investor can utilize. Given its strategic versatility, more manageable risk, and the possibility of expanding your portfolio with a lower investment, we want to show you its most important aspects.

As you might expect, micro futures represent contracts that include smaller lots. In its numerical representation, we are talking about one-tenth of the future. For example, for an S&P 500 mini contract worth $100, its micro value would be $10.

From a more technical perspective, a future is a financial derivative that moves based on an underlying asset. 

These contracts represent an obligation to cancel with cash or accept its shipment by the seller when there is a physical product. Micro e-mini futures are one of many types of futures that are in the market.

Being reduced versions, they have gained popularity for their liquidity, fairness, and demand.

Micro e-mini futures can be relatively new, although they are derived from what is known as e-mini futures. The purpose of its creation is to give more investment opportunities to those who have less capital or seek to diversify their portfolios with a broader position.

These stock exchange instruments emerged in early 2018. Trading on the S&P 500 Micro E-mini officially began on May 6, 2019, and was greeted with great pleasure by the market.

It reached a volume of almost 417,000 contracts traded just a month later, on June 3, 2019.

Why did the CME release the Micro E-mini futures?

They wanted to make the market more attractive and accessible, as they did when they introduced the E-minis in 1997.

Pros and cons of the contracts

Micro e-mini futures are quite an attractive option. Its main advantages are:

They allow you to operate 24 hours a day.

 This is what makes micro futures more attractive, the availability of entering the market at any time. This can be useful for testing strategies, studying trends, or learning a little more.

You can be short or long. 

There are no fixed rules on the minimum price variation and you can sell or buy the e-micro contract you have without problems.

Lower commissions. 

They can be as low as $0.50.

You don’t need that much balance in the account. 

This will depend on the broker you choose, but it is infinitely more viable to start with Micro Futures than trading Stocks or Mini Futures.

Liquidity. 

Micro Futures are very liquid markets despite their short life, so your orders will always find a counterpart.

Among the disadvantages, the most relevant would be:

It is an emerging market.

This means that it barely leaves you time to backtest and test your strategies. Although, in general, they replicate the behavior of e-Mini Futures, there may be some minor differences in price behavior.

What is the main difference between Micro Futures and standard contracts?

These one-tenth assets involve less risk when you want to apply leverage. Since you are reducing the amount of money you will invest, this is reflected in a more secure position. 

Non-institutional traders may find the Micro E-mini contract particularly attractive as it allows them to access more product options within their overall portfolio. In addition, it will enable you to test a trading method in a live market but with a risk exposure that is only 1/50 the size of a standard contract.

E-mini futures provide a low-margin entry into a highly liquid global market and enable appropriate risk management. Nonetheless, Micro E-mini S&P 500 futures could shake things up for the E-mini with even lower margin entry and risk exposure. In any case, both are unique tools that can help you achieve your business goals.

• Related: Forex lot sizes – micro, mini, and standard lots