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What are E-mini S&P 500 futures?

E-mini S&P 500 futures are traded on the Chicago Mercantile Exchange (CME) and allow traders to gain exposure to the S&P 500 index, a widely recognized barometer of the U.S. stock market. Representing one-fifth of the standard S&P 500 futures contract, E-mini S&P 500 futures make futures trading more accessible to more traders, and have been a success ever since their introduction in 1997. More recently, Micro E-mini S&P 500 futures have been introduced. Though there are now several E-mini contracts available across a variety of indexes, E-mini S&P 500 futures still account for the vast majority of all U.S. stock index futures trading. 

 

Chris Duhanci, head of futures here at Landshark Capital, has put together a basic video series for you to learn.

 

Tax Advantages

The effective tax rate for futures trading is lower than stocks because of the IRS’ 60/40 rule for futures and non-equity options. This essentially means:

  • 60% of profits are taxed as long-term capital gains
  • 40% of profits are taxed as short-term capital gains 

 This is in contrast to short-term stock trading, where 100% of your profits is taxed as short-term capital gains. This can make a huge difference in a larger trading account.

Leverage

Stocks: 50% margin requirement

Futures: 10% margin requirement

Futures grant you access to more leverage than stocks and ETFs. Futures contracts typically require around 10% initial margin, meaning you can control $50,000 with just $5,000 of margin. This is in contrast to stocks, which require 50% initial margin, meaning control $10,000 with $5,000 of margin).

No Pattern Day Trader Rule

Undercapitalized traders are undoubtedly familiar with FINRA’s pattern day trader rule, which restricts traders with less than $25,000 of equity in their account from day trading stocks or options more than 3 times in a rolling 5 day period.

Futures don’t carry these restrictions. As long as you meet the margin requirements (outlined above), you can trade as often as you’d like.

How to trade E-mini S&P 500 futures

E-mini S&P 500 futures represent one-fifth of the standard S&P 500 futures contract. E-mini S&P 500 futures trade electronically nearly 24 hours per day on the CME Globex® trading platform, on a quarterly cycle.

E-mini S&P 500 futures contract specifications

Considering trading E-mini S&P 500 futures? Here are the E-mini S&P 500 futures contract specifications.

 

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