Business & Investment

Use of Micro E-Mini for more accurate hedging of portfolio

At 1/10 the size of the E-mini, Micro E-mini futures can be used as a tool for more accurately hedging portfolios of all sizes. To understand the importance of these contracts, let’s take a look at the history of the index futures market.

Big S & P500 contract

1982, CME Group Pittrade S & P500 futures contract started. As the contract became more popular, the market remained relatively bullish in the 80’s and 90’s, and the size of S & P 500 futures contracts increased, the size of the contract’s estimated value valued many traders looking for hedging options. I attached. Until the mid-’90s, standard S & P 500 futures contracts are currently an estimated value commodity of around $ 800,000, so without at least $ 800,000, that commodity cannot be used for hedging.

Enter E-mini futures

Due to the large barriers to entry for S & P 500 index futures, CME Group launched the E-mini S & P 500 futures contract in 1997, and other E-mini futures products were soon introduced. At launch, the E-mini S & P 500 has an estimated value of approximately $ 60-80,000, making it a more suitable product for individual traders and a more realistic product for use in hedging strategies. Since then, the S & P 500 has been on a bullish trajectory, with a value of up to $ 180,000. As in 1997, margin requirements for E-mini contracts have become an exorbitant cost for many traders. The estimated value of the E-mini S & P 500 as a hedging tool is simply too high for many.

The era of micro E-mini

In 2019, the Micro E-mini S & P and other major micro-sized index futures markets were introduced. This brings the estimated value of the latest and smallest S & P 500 futures contract to approximately $ 17,000, making it a good hedging instrument again. Micro E-Mini futures include investors at all levels, regardless of portfolio size. With just one-tenth the size of an E-mini contract, Micro E-mini traders of all levels can now achieve more accurate hedging.

Watch this 3-minute video to learn more about using Micro E-minis for more accurate hedging of your portfolio.

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Use of Micro E-Mini for more accurate hedging of portfolio Use of Micro E-Mini for more accurate hedging of portfolio

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