E-mini Newbie Questions 2

H

hapaboy

I'm considering trading the e-minis and want to make sure I understand how they work. If I'm trading 1, repeat ONE contract of the E-mini S&P (ES):

1) The price moves in tick increments of .25, and each of those .25 increments represents a value of $12.50.

So if I go long at 1142 and sell at 1143, a gain of 1 point = 4 tick increments, I've made $50 minus commission.


2) For the E-mini Nasdaq (NQ):

The price moves in tick increments of .50, and each of those .25 increments represents a value of $10.00 even.

So if I go long at 1440 and sell at 1441, a gain of 1 point = 2 tick increments, I've made $20 minus commission.

3) ES traders use the S & P 500 index as their main indicator, NQ traders use the Nasdaq composite index as their main indicator. What other indicators are used?

4) Are there ever trading halts on these contracts? If so, how often do they occur?

5) If halts do occur, and say I'm long the ES at 1140 for one contract, and it reopens at 1100, have I just lost $2000? I'd imagine something happened like that with traders who held overnight before 9/11.

6) Do the spreads remain extremely consistent in .25 increments for the ES and .50 for the NQ? How about the depth (levels) of the bids and asks? Are they consistent in their increments or are there sometimes huge drops, i.e. best bid for ES will be 1435, but next bid down is 1433?

7) What are the dangers or benefits of trading these contracts INTRADAY & GOING HOME FLAT as opposed to stocks besides the lower margin requirements?

8) Are there market makers or specialists involved in trading the e-minis?

Thank you for your comments!
 
Originally posted by hapaboy
I'm considering trading the e-minis and want to make sure I understand how they work. If I'm trading 1, repeat ONE contract of the E-mini S&P (ES):

1) The price moves in tick increments of .25, and each of those .25 increments represents a value of $12.50.

So if I go long at 1142 and sell at 1143, a gain of 1 point = 4 tick increments, I've made $50 minus commission.

yep

2) For the E-mini Nasdaq (NQ):

The price moves in tick increments of .50, and each of those .25 increments represents a value of $10.00 even.

So if I go long at 1440 and sell at 1441, a gain of 1 point = 2 tick increments, I've made $20 minus commission.

yep

3) ES traders use the S & P 500 index as their main indicator, NQ traders use the Nasdaq composite index as their main indicator. What other indicators are used?

the futures lead the cash index usually. You don't really want to use the cash index as an indicator. What you use is up to you- technical analysis, support/ resistance, momentum, tick, trin, breadth, sentiment............

4) Are there ever trading halts on these contracts? If so, how often do they occur?

Events of the magnitude of 9/11 obviously. There are also occasional stoppages due to computer malfunction.

5) If halts do occur, and say I'm long the ES at 1140 for one contract, and it reopens at 1100, have I just lost $2000? I'd imagine something happened like that with traders who held overnight before 9/11.

yep

6) Do the spreads remain extremely consistent in .25 increments for the ES and .50 for the NQ? How about the depth (levels) of the bids and asks? Are they consistent in their increments or are there sometimes huge drops, i.e. best bid for ES will be 1435, but next bid down is 1433?

spreads will widen during mid day.


7) What are the dangers or benefits of trading these contracts INTRADAY & GOING HOME FLAT as opposed to stocks besides the lower margin requirements?

ease of entry and exit, no order routing concerns, otherwise about the same.

8) Are there market makers or specialists involved in trading the e-minis?

no, it's an anonymous electronic market.

Thank you for your comments!
More...
 
Thank you for your reply. You mentioned that the spreads widened during mid-day. How about the depths of the bid and ask?

:) :)
 
A few clarifications:

1) ES tracks/leads S&P cash index, but NQ tracks/leads not the NASDAQ Compositie ($COMPQ), but the NASDAQ 100 ($NDX). There is a difference, though $COMPQ and $NDX generally move roughly in tandem. NDX is the largest 100 Nasdaq stocks, COMPQ represents a broader market, and the two indexes are weighted in slightly different fashions.

2) Depth of bid and ask is nearly always tremendously high ---- ES and NQ are about as liquid as they come, between them trading over 500,000 contracts on the average day.

3) Spreads do often widen very slightly during midday dead zone, but are almost never more than .50 on ES and 1.00 on NQ during regular trading hours (RTH). But most of those 50 and 100 spreads quickly return to the standard 25s and 50s within a tick or two even at midday.

4) With regard to trading halts ----- The one practical thing to keep in mind on big down days where limit-down levels are in sight is NEVER to try to pick a bottom and go long near a limit-down level. If limit down is reached and trading halts, you might well find yourself in the hypothetical big-losing situation you describe.
 
Originally posted by armaniman

4) With regard to trading halts ----- The one practical thing to keep in mind on big down days where limit-down levels are in sight is NEVER to try to pick a bottom and go long near a limit-down level. If limit down is reached and trading halts, you might well find yourself in the hypothetical big-losing situation you describe. [/B]
More...

What is a "limit-down level"? Is it like a circuit breaker for futures?
 
The 5% limits for the ES and NQ as of 4/1 are (-55.00) and
(-75.00) respectively.


RULES for S&P 500, E-mini S&P 500, S&P MidCap 400, E-mini S&P MidCap 400, Russell 2000, E-mini Russell 2000 and S&P 500/Barra Growth & Value

Once a limit offer has been established, trading can occur at or above this limit for 10 minutes or until 2:30 p.m. CT. Trading will halt for 2 minutes if the primary futures contract is limit offer at the end of the 10 minutes or at 2:30 p.m. CT. Trading will resume with the 10% limit in effect.
 
A limit-down level is like a circuit breaker, at least on one side of the contract. When ES or NQ first goes down 5% (currently 55 points for ES and 80 points for NQ), limit-down is reached and trading can occur only at or above the limit price for a 10-minute period. After that trading resumes as normal, unless there is a total 10% drop in price (110 points for ES, 160 points for NQ). In that event trading is again halted below that new limit-down level..........All the particulars are spelled out on CME's web site. I've been E-Mini trading for two years, and have never seen any condition except the first 5% level limit down, and that only happens a few times a year. But you should always keep those numbers in mind ---- down 55 on ES and down 80 on NQ, just to avoid the potentially disastrous action of going long near limit down.
 
Just a reminder, tomorrow is the last day of the quarter (since Friday is a market holiday) so limits will be set off of tomorrow's closing price. Unless we have huge swings we should have 55 pt limits for ES and 70 pt limits for NQ for the 5% limit level.

To calculate the 5% limits take the closing price * .05 and round down to the closest 5 point number.
 
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