US$500 is all it takes to enter the futures market now
If there could be a perfect storm for global markets, it would probably be happening right now. Brexit is set to take place by end October with a suspended UK parliament and no deal in sight, while Sino-US trade tensions continue to escalate with tit-for-tat tariff retaliations.
This market uncertainty and volatility makes it an ideal setting for investors to trade global indices through futures, where rapid price movements make for possible trading opportunities.
Here’s everything you need to know to start trading now.
Having an understanding of the basics of futures trading
The futures trading market is one of the most liquid globally, with over 17.1 billion contracts traded in 2018 alone, a number that continues rising every year. Inherent liquidity in the market means investors can buy and sell easily and quickly, to take profit and minimise losses.
In futures trading, investors trade futures contracts, a type of derivative or financial contract. These are standardised contracts to buy or sell an underlying asset at a set price, on a set date in the future, at a predefined quantity and quality. That means a futures contract’s contract size, tick value, trading hours, contract expiration and settlement method have already been fixed.
Futures contracts are traded on regulated exchanges, which acts as the central platform between the buying and selling performed by various traders – including institutional, corporate and retail investors.
One example of a regulated exchange is the Chicago Mercantile Exchange (CME), the largest futures marketplace in the world. Some of its most popular products include corn futures (ZC), soybean futures (ZS), E-mini Dow ($5) futures (YM) and E-mini S&P 500 futures.
Knowing the benefits of futures trading
Why are more investors turning to futures trading? They offer a fast, cost-effective way to trade financial and commodity markets.
Since futures contracts are available for a variety of underlying assets, they are ideal for providing diversification in an investment portfolio. Investors can include as much and as little exposure as they need in dairy, metals, currency, global indices, among other assets, within the same trading account.
Investors often utilise futures to hedge their risks or seek profits from the fluctuations in the markets. As futures trades can go both long or short, investors stand to benefit from both the ups and downs in the prices of the underlying asset of their interest.
Unlike equities which trades only at specified timings depending on the geographical location of its exchange, futures can be traded round the clock. That means, futures investors can choose to take a position on events that occur in Asia, Europe or the Americas no matter what time it happens.
Recognising margin requirements and risks of futures trades
An essential part of futures trading is the use of leverage. That means investors only put up a small portion of the notional value of the underlying asset. The required margins vary depending on the underlying asset.
If you wanted to trade the S&P 500 index, you might choose to trade through the CME E-mini S&P 500 futures contract. The contract has a US$50 multiplier of the index price and a 5% initial margin. Assuming the index is trading at 2750, the notional value of the futures contract would be US$137,500, and the margin that you would need to put up is 5% of that notional value, or US$6,875.
On the flipside, the use of leverage also means there are backend risks for investors. Losses from a few bad trades could result in investors losing more than their initial capital.
CME Micro E-mini futures contracts – A better way to trade index futures
What if you do not wish to put up over US$6,000 into a futures trade because you are unsure if US President Donald Trump will backtrack on tariffs tomorrow? Is there a better way to trade in smaller contracts?
CME Group’s newly launched micro E-mini futures contracts presents just such an opportunity. It allows investors to trade in contracts that are a tenth the size of its respective E-mini counterparts, thereby reducing the initial margin proportionally as well. The micro e-mini contracts are currently available for four major US indices: S&P 500, Russell 2000, Dow Jones Industrial Average and the Nasdaq-100
Using the earlier example of the S&P500, an investor who trades using the CME Micro E-mini S&P500 futures contract would only need to put up an initial margin of US$687.50.
Besides lowering initial margins, the micro e-mini futures contracts also enable investors to manage their hedges and risks with more finesse.
Hear from the experts at CME Group to start trading CME Micro E-mini futures with just US$500
At this seminar, attendees will hear from Brandon Chia, Trading Manager at Bell Group. Chia manages the company’s proprietary trading and hedging desk and previously worked as a derivatives commodity trader for a family office in Singapore.
With nearly a decade of experience in hedging and speculating in CME, CBOT and TOCOM commodities trading like rubber, crude oil, gold, and grains futures, attendees will stand to gain from Chia’s insightful sharing.
Chia will discuss CME Micro E-mini futures in greater detail, including the uses of the contracts for different investment objectives, effective trading strategies, as well as the key economic data to follow when investing in US indices.
He will also reveal exactly how investors can start investing in CME micro e-mini futures with US$500.
Here are the details of the seminar.
CME Micro E-Mini Contracts – The Next Big Thing
Enter* the futures market with just $500
Friday, 27 September 2019
12 noon to 2 pm (Singapore Standard time)
Level 6 Presentation Room
250 North Bridge Road
#06-01 RAFFLES CITY TOWER
If this is something you are looking for, register your interest for this seminar right now.