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What is a Micro E-Mini Future?

Many traders are intrigued by futures. Indeed, they offer a number of benefits. Futures can be an efficient way to seek profits by allowing you to take a stance on the direction of the market using a limited amount of money.

Futures can also help you hedge or reduce risk. For example, if you had broad exposure to the stock market, you could sell equity index futures to help hedge any potential losses if stock prices drop. 

But sometimes traders can be deterred by the amount of capital they have to commit. Enter Micro E-mini futures—a new family of futures contracts designed to make futures more accessible to traders. 

What are Micro E-mini futures?

The Micro E-mini futures products are a new line of bite-sized futures contracts offered by CME Group. They offer a cost-efficient way for traders and investors to gain exposure to these four major U.S. indexes: 

  • S&P 500
  • NASDAQ-100
  • Down Jones
  • Russell 2000


These contracts are smaller versions of the CME Group’s popular stock index future contracts—the E-mini futures.

Why is CME launching this line of futures contracts?  

The value of a E-mini futures contract has increased substantially since these products were first launched in 1997.  For some traders, the amount of cash needed to access the futures market has become prohibitive. To address this issue, CME created the Micro E-mini futures. Although the Micro E-mini suite of contracts are similar in operational function to their E-mini counterpart, there is one important difference: cost. The new smaller, more affordable futures contracts will be one-tenth of the size, therefore, will require less cash to enter the futures market.

Here are the four micro E-mini Stock Index futures and their corresponding contract size.

Index Micro E-mini Contract Micro E-mini Contract Size

S&P 500 futures

Micro E-mini S&P 500 futures (MES)

$5 X S&P 500 Index

Nasdaq-100 futures  

Micro E-mini Nasdaq-100 futures (MNQ)

$2 X Nasdaqu-100 Index

Dow Jones

Micro E-mini Dow futures (MYM)

$.50 X DJIA Index

Russell 2000

Micro E-mini Russell 2000 futures (M2K)

$5 X Russell 2000 Index

Source: cmegroup.com

What are the benefits?

The new suite of Micro E-mini futures contracts makes the futures market more accessible to everyone. Tailored toward the retail trader and investor, these contracts offer important benefits:  portfolio diversification, capital efficiency, flexible risk management and around the clock access.  

  • Portfolio diversification: Smaller contract size provides added flexibility to your investment portfolio. With a notional value of approximately $8,000 to $15,000 at current market prices, traders and investors can finely tailor their exposure to the major stock indexes.  
  • Capital efficiency: Traders can gain exposure, either long or short, to the major U.S. stock indexes by posting a performance bond (a financial guarantee required of both buyers and sellers of futures contracts to ensure fulfillment of the contract) or an initial margin requirement of five to seven percent of the notional value of the contract. 
  • Flexible risk management: For investors holding a long-term stock portfolio who want to reduce some or all of their exposure to equities, selling Micro E-mini Stock Index futures offers an efficient way to mitigate risk without disturbing your stock portfolio.   
  • Around the clock access: With trading available nearly 24 hours a day, six days a week, traders can capitalize from market moving events as they occur around the globe.
     

What are the risks?

As with any futures trading, there’s an inherent risk—that is, you may lose more money than you initially invested. Unlike a traditional stock or bond investment, in which you may lose only the amount you invested, futures also come with a back-end risk—meaning, you won’t know if you’ve gained or lost until the contract’s expiration date. Although you have the option to close out of the position any time prior to expiration, if you lost more than you invested on the expiration date, you owe money.  

With this said, E-mini futures are considered the most actively traded and liquid of the equity index futures; however, liquidity for the Micro E-mini futures will still depend on the popularity of product and the initial trade volume. Also, access to 24/7 electronic trading makes it easy for traders and investors to overtrade.

Keeping these risks in mind, you may want to monitor liquidity for Micro E-mini futures until they become more established. 

How do they work?

The Micro E-mini futures contracts feature a contract multiplier that is one-tenth the size of their E-mini Stock Index suite of contracts. For example, the Micro E-mini Russell 2000 (M2K) has a $5 multiplier, while the E-mini Russell 2000 (RTY) has a $50 multiplier. This means that traders and investors will gain or lose $5 per point in M2K compared to $50 per point in RTY.

Index Micro E-mini Contract Multiplier E-mini Contract Multiplier
S&P 500 $5 X Index $50 X Index
Nasdaq-100 $2 X Index $20 X Index
Dow Jones $0.5 X Index $5 X Index
Russell 2000 $5 X Index $50 X Index

Source: cmegroup.com


Like their E-mini counterparts, Micro E-mini futures trade on a March quarterly expiration cycle (third Friday of March, June, September and December). The tick increments will follow their E-mini counterparts as follows:

Index Futures Contract Specs Outright Calendar Spread
Micro E-mini S&P 500 futures 0.25 Index points= $1.25 0.05 index points= $0.25
Micro E-mini Nasdaq-100 futures 0.25 Index points= $0.50 0.05 index points= $0.10
Micro E-mini Dow futures 1.00 Index points= $0.50 1.00 index points= $0.50
Micro E-mini Russell 2000 futures 0.10 Index points= $0.50 0.05 index points= $0.25

Source: cmegroup.com


Here are the contract specifications:

CONTRACT Micro E-mini S&P 500 Micro E-mini Nasdaq-100 Micro E-mini Russell 2000 Micro E-mini Dow
CONTRACT SIZE $5 x S&P 500 Index $2 x Nasdaq-100 Index $5 x Russell 2000 Index $0.50 x DJIA Index
TRADING HOURS

CME Globex: Sunday through Friday, 5:00 p.m. ET to 4:00 p.m. ET

Daily trading halt: Monday through Friday from 3:15 p.m. ET to 3:30 p.m. ET
TICK SIZE 0.25 Index points 0.25 Index points 0.10 Index points 1.00 Index points
DOLLAR VALUE/TICK $1.25 per contract $0.50 per contract $0.50 per contract $0.50 per contract
PRODUCT CODE MES MNQ M2K MYM
CONTRACT MONTHS March, June, September, December
DELIVERY Cash settlement to Final Settlement Price
TERMINATION OF TRADING 9:30 a.m. ET on 3rd Friday of contract delivery month

Source: cmegroup.com

How do I trade Micro E-mini futures at Schwab?

The Micro E-mini contracts trade on the CME GLOBEX trading platform Sunday through Friday between 6:00 p.m. and 5:00 p.m., with a daily trading hold between 4:15 p.m. and 4:30 p.m. ET. 

Micro E-mini stock index futures are available on Schwab’s StreetSmartCentral and StreetSmart mobile trading platforms.

All in One Trade Ticket Screenshot

Source: schwab.com

 

For additional details, visit the CME Group’s FAQs page.

What You Can Do Next

  • Read and watch educational content about futures.
  • Learn more about futures trading at Schwab.
  • Call 877-807-9240 to speak with a Schwab futures trading specialist.
  • Ready to trade futures at Schwab? Open an account.
  • Schwab clients: Interested in trading futures? Login to apply for futures trading approval.
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Important Disclosures:

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.

Futures trading offered and positions held through Charles Schwab Futures, Inc., a separate but affiliated company of Charles Schwab & Co., Inc. Both are subsidiaries of The Charles Schwab Corporation. Futures trading involves substantial risk and is not suitable for all investors. Please read Risk Disclosure Statement for Futures and Options.

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