Eminis are sometimes referred to as “emini futures” and are smaller units of older, “matured” futures contracts that have been around for quite some time. Emini’s are still fairly new to the trading scene having begun only 10 years ago, while the “full” contracts have been around for longer than 20 years.
Whether you are completely new to the stock markets or a seasoned trader, one piece of advice is you should be trading the S&P 500 E-Mini Futures market.
Large Conglomerates and Hedge Funds trade the S&P 500 Futures contracts. This way they are able to leverage their finances, not being obliged to invest your money in any one institution but actually being able to trade all 500 at once. The S&P 500 E-mini Future is a smaller version of these same futures contracts traded by large corporations. It has been designed primarily for individual traders.
Stock index eminis are very often used for day trading which comes down to guessing which direction the value (price) of their underlying index will move. If you expect it to move up, you buy one or more emini contract and if the price indeed moves in your favor you can then unload these contracts for a profit. If you expect it to move down, you take a short position, selling emini contracts, and if you predicted the move right, you can brag about the money you have made riding the move and exiting it at your target. Clearly, when your predictions do not pan out, you will end up with a loss. It is because of this speculation on which way the index will move that futures often lead the index price.
This price for some indices can be calculated to the second decimal point, but even in such cases the price of the related emini market changes by some larger fixed values known as ticks. For ES, 1 tick corresponds to $12.5 and one point consists of 4 such ticks. For YM, the tick is the same as the point and both are equal to $5. When your position moves in your favor by 1 pt, you can make $50 in ES or $5 in YM per contract, assuming you are able to unload it after the move is over. Whether this is possible or not depends on your emini liquidity at the given (exit) price. Now, you should better understand why it is always a good idea to trade liquid markets. Simply because these markets allow you to take your profits (or losses) more easily.
There are several futures markets that have developed both full and emini contracts. The most popular of them is the S&P 500 futures whose emini contract is often denoted by “ES,” its ticker. Another very popular emini contract, which was launched two years after the S&P 500 eminis is the NASDAQ 100 emini, frequently referred to by its ticker “NQ.” Yet another one is Russell 2000, known among traders as “ER2.” And whilst in real life situations these tickers may alter depending on your stock broker and even more on the charting platform you use, there is one thing all these contracts have in common: they all trade electronically on Globex, while their bigger “brothers” trade on the Chicago Mercantile Exchange (CME). There is one well known emini contract that calls the Chicago Board of Trade (CBOT) its home and that is the Dow Jones emini. It trades electronically just as the other mentioned above.
All of these eminis have yet another thing in common: they are futures contracts for stock indices. While there are now eminis for other futures in the markets that can be commodities (such as gold, silver or crude oil) or currencies (e.g. yen, euro), these newcomers are usually a lot less liquid then the stock index eminis and trading them can be much harder if not substantially riskier. If you are just starting in this field, it would be advised that you stick to the more established emini markets that guarantee better volumes and thus also better trades due to better liquidity.
The size of the profits you can make while day trading eminis is a function of the intraday range of your emini market. In ES, whose average intraday range is about 10 pts, the profits of 10 pts could in principle be possible, but in practice, because of the market unpredictability, most daytraders should be happy with a consistent daily profit of 2 pts which not infrequently is made only after several trades. If the commission is included (around $5 per round turn for the average emini broker), this profit is smaller than $100 per contract and thus in order to increase it most daytraders employ more than one contract in their trading.
How many contracts you can trade will depend on the emini margin which in turn varies from one broker to another. Some brokers, those who cater specifically to emini traders, set their daytrading margins as low as $500 per contract, and sometimes even lower. Most, though, require you to have at least $1000-2000 per contract in your account before you can trade. It is, however, highly advisable to have at least twice the margin per contract if you are to feel comfortable trading. Not all of your trades will be winners, you need to account for losers as well. Since the losers will cause drawdowns in your equity, you need to have some cushion to withstand them. Twice the margin is, in my opinion, the absolute starting minimum, three times is even better, particularly if you are a total beginner. In order to be allowed to trade, your equity must never fall below the margin level per contract. If it does, you need to reduce the number of contracts you trade and if this is not possible, you need to stop trading until you raise enough capital again.
You may have heard about “Share Renting” or “Renting Shares” recently, and wondered what it actually is.
You’ve heard of buying investment houses and renting them out?
Share Renting is a similar wealth creation concept, coined by Jamie McIntyre and is another name for Call Options – which is a trade on the options market familiar to those in the know. Jamie McIntyre uses the term “Renting Shares” to simplify the learning process for the average person by using terms easily understood to propel them investing in the stock market.
Most people have the understanding that high profits also come part and parcel with high risk, although using share renting as a strategy this is not necessarily the case. Essentially, you buy shares (Jamie recommends or bases his theory on at least 1000 shares of a good blue chip company) when they are trading at a low price, and then sell the right to buy the shares (if they increase in value to a pre-determined amount, by a pre-determined date) to a third party. You are paid an upfront figure for each share, which you get to keep. Example being that if you wanted to rent out your 1000 shares at the current call option of 40 cents each then you will be paid $400 up front by the company “renting” your shares. This $400.00 is yours to keep the only catch is they can be sold by the renter if the shares go up to the agreed price then they have the right to buy out your shares. So within a period of a month you have received the $400.00 up front plus your capital gain on those shares, if they went up $1.00 then you have made yourself $1400.00 in that one month. If they don’t reach the pre-determined amount, you keep the shares and can rent them out again.
The other option is you sign a contract with a company saying you will buy 1000 shares if they fall to $10.00. The company pays you upfront for each share you agree to buy based on the put option chart which lets say is 50 cents per share, then if the shares do drop to $10.00 you are obliged to buy them. So you have now been paid $500.00 you buy the shares and now rent them out and basing ourselves on the above mentioned figures you have made $900.00 and only just bought these shares….Not bad! In saying that if the shares never drop to $10.00 in that month then you have been paid $500.00 for something you will never buy.
This is the wealth creation strategy that Jamie has been teaching for the past 10 years, suffice to say using these strategies he became a self-made millionaire within the first 5 years of implementation, but with his teachings, guidance and resources people now have the potential to halve this timeframe. Jamie will theorize that education standards are outdated and need to be brought into the 21st century. We’re all taught that we need to get a job and work hard – all of our lives. But Jamie teaches that it’s not working harder that makes the difference between the rich and the poor but working smarter creating wealth.
