This Day In Market History: CME Launches S&P 500 Futures

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On April 21, 1982, S&P 500 index futures contracts began trading on the Chicago Mercantile Exchange for the first time.

Where The Market Was: The Dow finished the day at 843.42. The S&P 500 traded at 115.72.

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What Else Was Going On In The World? In 1982, Michael Jackson released his ground-breaking album “Thriller.” The U.S. government ordered the breakup of AT&T Inc. T on antitrust grounds. U.S. Federal Reserve interest rates were 11.5%.

Launch Of S&P 500 Futures: S&P 500 futures contracts are contracts that allow investors to speculate on the future value of the S&P 500 and its components. They are also a popular tool in hedging.

The S&P 500 Futures Contract is priced by multiplying the value of the S&P 500 by $250. Given the prohibitive cost of the contracts, the CME introduced the E-mini S&P 500 Futures Contract in 1997. The E-mini S&P 500 futures contract is priced at just $50 times the value of the S&P 500.

S&P 500 Futures Contracts have many advantages, including the fact that they trade virtually 24 hours per day on exchanges around the world. S&P 500 Futures Contracts also have tax advantages for day traders. Only 40% of capital gains from short-term futures trades are taxed as ordinary income, whereas 60% of those gains are taxed at the standard long-term capital gain rate.