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What is It?
E-Mini
contracts are smaller electronically traded versions of the S&P 500 and
NASDAQ 100 stock indexes. They are 1/5 the size of the larger institutional
contracts. E-Minis are traded electronically on your PC.
Why Trade Them?
- Volatility
creates opportunity to earn much more with lower account balances
- Broad
market exposure for low cost
- You can
hedge against your own portfolio
- You can be
profitable regardless of market direction
- Tax
advantage compared to stocks
The Case for Trading
Futures: The Traders Have Voted!
In a little over 4
years, since inception, average daily volume of the E-mini S&P 500 has grown
from 11,000 contracts to nearly 240,000 contracts.
Trading Advantages
Ease of use versus
stocks:
- Totally
electronic platform with fast, efficient fills and virtually 24-hour
trading
- “Round
Trip” versus in-and-out commission
- Monitoring
a few key indexes vs. dozens of stocks thus eliminating traditional stock
picking and associated risks such as:
-
Pre-announcements
- and
now…accounting minefields
- Excellent
profit potential
What is 1 point of the
E-mini NASDAQ 100 worth?
$20 per
point per contract
For example: If the Nasdaq100 Index value is at 1800 and goes up 5
points to 1805 the difference is 5 points which equals $100.
$20 x 5 = $100 profit or loss per contract.
What is 1 point of the
E-mini S&P 500 worth?
$50 per point per
contract
For example: if the S&P 500 Index value is at 1500 and goes up 5
points to 1505 the difference is 5 points which equals $250.
$50 x 5 = $250 profit or loss per contract.
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The Case for Trading
Futures – Tax issues
Future are
generally traded more favorably and receive “60/40” treatment. Equities
require a longer holding period for favorable tax treatment.
Example:
- Trader “A”
makes $10,000 in profits over 1 week trading Intel
- Trader “B”
makes $9,800 in profits over 1 week trading E-minis
- Which trader
would you rather be? (assuming 39.6% bracket)
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Trader “A” |
pays
IRS $10,000 x .396 |
=
$3,960 |
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Trader “B” |
pays
IRS $9,800 x .60 x.20 |
=
$1,176 |
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plus
pays IRS $9,800 x .40 x .396 |
=
$1,552 |
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60/40 blend results in tax rate of 27.8% or |
=
$2,728 |
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Tax Savings |
=$1,232 |
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