Product Focus: Micro E-Mini Equity Index Product Suite

By Craig Bewick
MAR 23 2021

As we mentioned last week, due to vacation schedules, we are going to use the Key Takeaways section to do CME Group “Product Focus” columns today and tomorrow instead of a market recap.  We’ll be back on Thursday with our regular column.  For today, we’ll take a closer look at our Micro E-mini Equity Index product suite that was launched on May 6, 2019 with the following futures products:

  • Micro E-mini S&P 500
  • Micro E-mini Nasdaq-100
  • Micro E-mini Dow
  • Micro E-mini Russell 2000

These products, that are 1/10th the size of their E-mini counterparts, traded 310,072 contracts on the first day of trading and never looked back, having traded over 650 million contracts in less than two years since then.  On August 30th, 2020 we launched options on the Micro E-mini S&P 500 and Nasdaq-100 which have traded nearly 10k per day so far this month. 

As we mentioned above, at 1/10 the size of the E-mini products, the Micro E-mini products allow traders to adjust the exposure they want to these four major indexes with great precision and allow for flexibility in scaling into and out of positions.  At the current prices, this represents about $26k and $20k worth of exposure to the S&P 500 and Nasdaq-100 respectively, per contract and the current margin requirements at CME Group for each is $1,600 and $1,100, underscoring the capital efficient nature of futures trading.  Of course, all of the same features of CME Group futures such as nearly around the clock access, potential tax benefits, liquidity etc all apply to Micro-sized products as well. 

Similarly, the options on the Micro E-mini S&P 500 and Nasdaq-100 allow for greater flexibility in exposure and capital exposure.  For example, one popular option spread at CME is the Call Vertical which involves buying (selling) a Call at a particular strike and selling(buying) a Call at a higher strike.  At the time of this writing, the midpoint price of the Micro E-mini and E-mini S&P 500 ATM Call (50 Delta) with just three days until expiration is 22.50 points and the midpoint of the ~30 Delta strike is 11.25.  Therefore, if you were to buy this Call spread, it would cost you 22.5 minus 11.25 points or 11.25 points.  In the E-mini option, this would require a cash outlay (and risk) of $562.50 for an option that expires, again, in just three day; in the Micro option, the cash outlay (and risk) would be 1/10th of that, or $56.25.  Of course, the Micro also gives you the flexibility of gaining exposure in between those two levels by buying a customized number of spreads to suit your risk appetite. 

We used QuikStrike data to create graphs of the E-mini (and Micro) S&P 500 and Nasdaq-100 price and volatility since the beginning of 2020 to show the divergence/convergence of both through the pandemic-induced volatility and then through the recovery. 

ABOUT THE AUTHOR

Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

Connect with Craig at activetrader@cmegroup.com

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