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.

Get started with NinjaTrader

NinjaTrader supports over 100,000 traders worldwide who are powerful and user-friendly. Trading platform, Significant discount fees and world class support. NinjaTrader is always free to use for advanced charting, strategy backtesting and immersive Sim Trading experience.

Ninja Trader’s award-winning download Trading platform And today, start a free trading demo with real-time market data!

This article is for educational and informative purposes only and should not be considered a solicitation or recommendation for a product, service, or trading strategy. This includes content from independent individuals or companies that have nothing to do with the NinjaTrader Group (NTG) or its affiliates. The content and opinions contained in this article do not necessarily reflect the official policies or positions of NinjaTrader or its affiliates.



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

https://ninjatrader.com/blog/using-micro-e-minis-for-a-more-precise-hedge-on-a-portfolio/ Use of Micro E-Mini for more accurate hedging of portfolio

Back to top button