Getting Started in Stock Index Futures Trading

 

NASDAQ Futures

NASDAQ futures are listed on the CME division of the Chicago Mercantile Exchange Group; it closely tracks the NASDAQ 100 index which includes the 100 largest non-financial stocks listed on the NASDAQ stock exchange. Prior to the closure of the futures trading pits at the CME, the exchange provided traders with two alternatives in speculation on the NASDAQ, a full sized contract and an e-mini version. However, the NASDAQ 100 futures contract now only trades in an e-mini version. This is probably a positive development to the retail trading community, because the original NASDAQ futures contract (full-sized), at $100 per point, was too large and volatile for most speculators.

The e-mini NASDAQ 100 futures contract comes with a point value of $20 (one fifth of the original $100 full-sized contract) reducing the contract size considerably. With the futures market at 4520.00, an e-mini NASDAQ contract is equivalent to $90,400 of the underlying index.

An e-mini NASDAQ trader long from 4505.50 and subsequently able to sell the position at 4532.75 would have been profitable by 27.25 points or $545. This is figured by subtracting the exit price by the entry price and multiplying the difference by $20.

4532.75 – 4505.50 = 27.25

27.25 x $20 = $545 (minus commissions and fees)

Generally speaking, the e-mini NASDAQ is the tamest speculative vehicle in the stock index futures complex in regard to daily profit and loss per contract held. Further, it also comes with the lowest margin requirement. For this reason, some beginning traders opt to trade the e-mini NASDAQ futures when dipping their toe into the futures arena. With that said, the NASDAQ 100 is far more susceptible to price moves dependent on a single stock (such as Apple) than a broader index such as the S&P 500 futures might be.

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