Winning Investments

If you are looking to invest in the futures trading market but you do not have the money for it, then e-minis are for you. Simply put, e-minis are smaller units of full futures contracts that are basically made more affordable for smaller investors. After all, there are investments like crude oil that cannot be entered when you only have a few thousand dollars to spare.

Types

You can choose from among many futures markets offering both full and e-minis contracts. The more notable are the following:

* S&P 500 (ES) - One contract is equals to US$50 times the value of the S&P 500 stock index.

* NASDAQ 100 (NQ) - There are no financial companies listed although 14 corporations incorporated outside of the United States are included. Also, stringent standards of inclusion in the stock market index are enforced. The notional value of one contract is US$20 times the value of the stock index of the NASDAQ 100.

* Russell 2000 known as ER2 - The notional value of one contract is US$100 times the value of the stock index of the Russell 2000.

Operations

E-minis are not backed by stocks in their corresponding indexes. Generally speaking, one contract is backed by the counter-party taking the opposition position on said contract. As an example: Investor X purchases an e-mini on the S&P 500 while Investor Y shorts the said contract. The implicit agreement is that investor Y agrees to pay investor X of and when the index rises and vice versa.

If you expect the stock index to move up, you purchase one or two e-mini contracts. If it moves in your favor, you can sell for a profit. If you predict the stock index to move down, you will take a short position and sell the e-mini contracts.

Investors take on a levered position on the stock index since these futures contracts are backed by cash. This is an advantage since you only need to put up approximately 5-20 percent of the cash necessary for an investment on the index ETF. The disadvantage is that you have to give up your dividend income when you decide to invest in e-minis.

Commonalities

There are two commonalities of the above mentioned e-mini futures contracts. First, these are futures contracts anchored on the stock indices. Second, these futures contracts all trade electronically either on the Globex or on the Chicago Mercantile Exchange (CME). However, the Dow Jones e-mini, which is designated by the ticker symbol "YM", makes its home on the Chicago Board of Trade (CBOT).

There are other emerging e-minis for commodities like gold, silver and crude oil as well as currencies like yen and euro. You must tread carefully on these e-minis due to their limited liquidity when compared to the stock indices e-minis. Take note that stock indices have better volumes and better trades, thus, better liquidity.

Investing in e-minis can make or break your investments. If you apply your good sense in stock investments, you can make good money trading in these smaller futures contracts, too.

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For more information on e minis futures visit http://www.e-options.org/