A Crypto Traders Guide to Trading Micro E-Mini Futures

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. This article is the opinion of Optimus Futures.

Cryptocurrency traders shouldn’t limit their opportunities to digital tokens.

Micro E-Mini futures are opportune products for those looking to get their feet wet.

E-Mini futures share similarities to crypto markets but with exciting and potentially lucrative added benefits.

This guide explores the what, why and how of Micro E-Mini futures.

What Are Micro E-Mini Futures?

 A strong grasp on  the basics of futures contracts in general opens the door to a well-grounded understanding of Micro E-Mini futures.

Futures contracts are financial agreements to buy or sell a set amount of an asset at a point in the future known as the settlement date.

Like options contracts, futures contracts are derivatives, which means their value is based on the price of another asset.

Unlike options contracts, where the owner has the option to exercise the contract, the owner of a futures contract has an obligation.

Futures contracts settle in 1 of 2 ways: cash or delivery.

Most indexes settle in cash, which means the 2 parties net the difference between the spot (current) price of an asset and the contract price.

Delivery contracts, like oil or gold futures, require the owner to take delivery of the asset at settlement.

Because most traders don’t actually plan to take ownership of the underlying asset, they normally close or roll the contract to the next month. 

Micro E-Mini futures are futures contracts that are 1/10th the size of regular futures contracts for stock indices.

You can think of them as bite-sized portions of regular futures contracts.

As an example, gold futures contracts control 100 troy ounces while a micro contract controls 10 troy ounces.

Why Trade Micro E-Mini Futures?

As a subset of futures, Micro E-Mini futures carry the same benefits including:

• Available on multiple asset classes including metals, energy, commodities, indexes, volatility and bonds.
• Future markets trade almost 24/7.
• Traders can easily establish long bullish or short bearish positions.
• Leverage makes futures contracts more capital efficient.
• Along with leverage, many futures contracts have low margin requirements.
• Futures impose no pattern day trading restrictions.
• Most future markets are highly liquid.
• Contracts are routed through regulated exchanges, providing transparency and price discovery.
• Traders managing portfolios of multiple asset classes can use futures as hedging instruments to manage risk.
• Futures can also be used for outright speculation.
• Tax advantages may be available for trading futures compared to other asset classes.

Micro Futures vs. Standard Futures

In most cases, micro futures control 1/10th of the underlying asset as regular contracts.

However, a few other key differences affect trading strategies.

For example, the Micro Gold futures does not allow for the delivery of 10 oz. gold bars. However, investors can accumulate enough micro contracts to take delivery of a 100 oz. gold bar.

Additionally, tick sizes may be different between micro and standard futures.

For example,the standard Euro futures contract is priced at 0.00005 euro increments at $6.25 per tick.

Euro Micro E-Mini futures are priced at $0.0001 Euro per tick at $1.25 per tick.

The margin requirements are also different based on the amount of the asset within each contract.

Cryptocurrency vs. Futures: Similarities & Differences

It’s important to understand the similarities and differences between the cryptocurrency and futures markets.

Similarities

• Traders employ technical analysis for both markets.
• News events can drive volatility in price action.
• Multiple different assets are available for trading.

Differences

• Volumes are uniform and displayed for futures trading.
• Futures volume often increases during the main sessions (for example, Micro E-Mini S&P 500 futures see more contracts traded from 9:30 a.m. - 4 p.m. EST).
• Futures do not trade between 5 p.m. and 6 p.m. EST and between 5 p.m. EST on Friday through 6 p.m. EST on Sunday.
• The centralized exchange for futures allows the publication of information like the Commitment of Traders report, which details which types of traders are long and short for each contract and their position size as a group.
• Cryptocurrencies trade the current price of that token while futures trade the price of an asset at a future date.
• If you want to carry over a futures contract past expiration, you need to roll that contract, which often costs money. Cryptocurrencies charge nothing to roll contracts.

Ownership marks a crucial difference between trading in these 2 markets.

When you trade cryptocurrencies, you own that token as you would a stock.

Futures contracts don’t own anything. They are derivative contracts for an exchange of an asset at some point in the future.

While buying a cryptocurrency means you can immediately go out and spend it, a futures contract needs to be closed or settled before you can use those funds.

Lastly, it’s important to understand that while cryptocurrencies are bought and sold at the market price, futures contracts come with different settlement dates. That means you not only need to select the asset you want but the appropriate expiration date as well.

How to Use Leverage in Futures Trading

One of the unique features of trading in these markets is the leverage available with each futures contract.

Leverage allows traders to put down less capital to control larger amounts of an asset.

For example, one contract of the E-Mini S&P futures has a notional value 5x the S&P 500 index.

So, if the S&P 500 trades at $4,600, a micro contract controls $23,000 of notional value.

To open a position in this futures contract, depending on the broker, as little as $1,320 is needed, called the initial or overnight margin.

Once a position is open, you need as little as $1,200, which is known as maintenance margin.

However, if you are day trading, margins can be much lower, less than $100 in some cases.

While standard futures contracts employ leverage, Micro E-Mini futures allow you to break up trades even further, providing more opportunities to optimize your positions.

One word of caution regarding leverage.

It is possible that sharp moves in the market can cause your account balance to go negative. When this happens, you are required to bring your account back to the necessary margin requirements or liquidate your positions and settle balances with your broker.

That’s why risk management is particularly critical with futures trading. And using Micro E-Mini futures can help you reduce risk by lowering the amount of leverage you employ at any 1 time.

Choosing the Best Platform for Trading Micro E-Mini Futures

With multiple platforms to choose from, it’s important to pick the one that’s right for you.

When you evaluate a trading platform and futures broker, consider the following:

• Data Feeds & Routing: Not all brokers and platforms have the same latency on data and order execution. If you require high-speed trading, consider a broker with access to co-locations.

• Commissions & Fees: While stock trading has become commission-free, futures trading still requires several base fees as well as broker commissions. Brokers may offer discounts on fees based on volume or product choices.

• Technical Indicators: Futures traders employ various analysis techniques including technical indicators. Some platforms come preloaded with all indicators while others require you to purchase add-ons.

• Trading Profiles: One of the more interesting analytical tools common among futures traders is profiles. These indicators include footprints, volume profiles and market profiles. While some platforms come with these capabilities built in, not all support this type of analysis.

• Programmability: Traders looking to use automation need to check the programmability and compatibility of their brokers and platforms.

• Backtesting Capabilities: A great way to analyze a new idea is with backtesting. Backtesting uses historical data to look at a trading strategy to see how it would have performed.

• News Feeds: With futures markets trading almost 24/7, real-time news feeds can help traders stay on top of the market-moving events.

• Customer Service: As with any trading platform and broker, you want to choose a broker with a high customer service rating that is available when and how you need them.

How to Trade Micro E-Mini Futures

Once you’re ready to start trading Micro E-Mini futures, you’ll need to open an account with a futures broker.

Holding the title for the “Best Broker for Trading Micro Futures” at Benzinga is Optimus Futures —- ideal for anyone interested in trading CME Group’s micro futures with free platforms, low margins, fast account approvals and easy funding and withdrawals.

To get started, open an Optimus Futures account and fund it with at least $100 via ACH, wire transfer or check. You’ll get free access to the Optimus Flow trading platform, or you can choose from its vast selection of 3rd-party apps where you can buy and sell the CME Group’s Micro E-mini futures contracts and pay as little as $0.10 per trade for high-volume traders. 

You can also try a free demo of its flagship platform Optimus Flow and trade risk-free in a simulated environment powered by live market data.

Learn more about Optimus and Micro E-mini futures here.

Or Check out Benzinga’s Full Optimus Futures Review

This matter should be viewed as a solicitation to trade. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. CME Micro contracts generally have a value and margin requirement that is one-tenth (10%) of the corresponding regular contract. The cost of trading Micro contracts is higher than regular contracts, when measured as a percentage. Commission rates are not always one-tenth of the rate for regular contracts. Exchange and NFA fees are not proportionately reduced. Frequent trading of Micro contracts further compounds the cost disparity. Futures transactions are leveraged, and a relatively small market movement will have a proportionately larger impact on deposited funds. This may result in frequent and substantial margin calls or account deficits that the owner is required to cover by depositing additional funds. If you fail to meet any margin requirement, your position may be liquidated, and you will be responsible for any resulting loss.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.