Using the E-Mini S&P 500 to control the stock market

Investors globally seek products that represent a portion of their portfolio, a product that may reflect the marketplace’s sentiment, a product that offers liquidity and offers a lower margin to trade in. The ES trades throughout the evening beginning at 5:00 PM CST and ending 4:00 PM CST the following day. There is a maintenance pause between 3:15 PM CST to 3:30 PM CST. The E-Mini S&P 500 allows a trader to control the market weighted average of 500 individual stocks representing market capitalizations of large companies or large cap US equities. 

The Chicago Mercantile Exchange introduced the contract September 9^th 1997. The industry leaders or heads of many brokerages participated that first evening with 100 lot orders to kick-off a successful contract. Over the years, the exchanged had accumulated a book of contracts that simply did not pull the volume. The Globex traded product was an answer for traders that wanted the host matched orders system of trading. The benefits that traders sought was a fair marketplace, instantaneous fills and volume to be sure that the slippage was greatly reduced from previous trading methods. The appeal of the stock index futures was the day-trade margin often reduced to a mere $500.00 to control one contract. That is only about a tenth of the full margin required to hold the contract overnight. The good faith deposit is required by the exchange to hold a contract beyond the one-day session.

The ES became a favorite which traders from all walks of life may enter with hopes of making points or ticks. The ES point is valued at $50.00, while the ES tick is valued at $12.50. The most important part of trading the ES would be to devise a plan. “Plan the trade” and “Trade the plan” to maintain a strict discipline for trading. It is all about filtering out the potential bad trades and only seeking trades that have a possible 80 % probability of working. There are many styles of trading such as scalpers, break-out strategies, trend traders and contrarians to name a few. The current market conditions and risk parameters must be addressed to begin. One must feel comfortable with a set amount of losses before they may begin any trading plan. Fear of loss can impede a trader’s ability to make money more than many other factors. Mindset is an important part of trading. Clarity and focus must replace any stress or distractions. The platform stability is important, but regardless it is vital to retain a written trade log and phone numbers to a desk should there be a power outage or other mishap.

Today’s traders attempt to become educating in trading prior to entering the venture. Fundamentals cannot be totally ignored but most investors today have become chartists. Descriptive may impress at cocktail parties, but predictive may be the only way to trade. This is where “indicators” come into play. Most successful traders may have indicators that will cite exact trade setups. Once entering a trade, it is imperative to keep a stop to control the possible loss on the trade and either a trailing stop or target to exit the trade.

Trading is a business, so it is advisable to conduct a feasibility study by paper trading or back data studies. Past performance does not constitute future results. There are classes offered that may prepare a trader for trading thru paper trading and trade room action.

Whether an investor wants to hedge a portfolio or make sure they are diversified in their portfolio for a smooth equity curve, trading the ES may offer correlations with other products which may prove fruitful. The VIX may show an inverse relationship to the ES much like a teeter-totter as one goes up, the other goes down. A portfolio may reflect specific stocks which may be hedged by the stock index futures or stock index options. As the portfolio may increase in value, the E-Mini S&P 500 Put may lose money. Inversely as a portfolio may decrease in value, the short E-Mini S&P 500 position or Put may increase in value offsetting the losses somewhat in the portfolio. Earnings season may be particularly volatile as companies report their quarterly results. Transparency may be another benefit of futures trading as the host computer instantly shows the matched trades. The Chicago Mercantile Exchange volume may be around 17.9 million contracts per day. While any investment requires research and credible professionals to work with, the E-Mini S&P 500 holds some appeal in its diverse allocation while maintaining a sustainable risk factor.

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RISK DISCLOSURE:
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN. 

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE “RISK DISCLOSURE” ACCESSED BY THE LINK BELOW. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICES.