Advantages of trading futures over stocks and ETFs
Are you currently trading stocks or ETFs? Say hello to futures on the S&P 500 and Nasdaq-100 indices. Explore the unique benefits other financial products can’t offer.
Why trade futures over stocks or ETFs?
Trade more with less
Control a larger position with only 5% – 10% of the required margin using futures, compared to stocks and ETFs.
Tradable around the clock
Trade 23 hours a day and act on market volatility. With stocks and ETFs, overnight opportunities may be missed as markets slow down.
60/40 tax treatment*
Take advantage of unique tax advantages* when trading futures over stocks and ETFs, including the Section 1256 treatment.
Fewer trading restrictions
Futures aren’t subject to the pattern day trading regulations that apply to ETFs, stocks or stock options. Plus, enjoy the flexibility to go long or go short.
Stretch your capital further with futures
In the example below, you can see that futures require less capital to trade the same notional value of $25,000 in the S&P 500 when compared to ETFs and a basket of stocks.
Trading futures
If a trader is bullish on the S&P 500, they can purchase a Micro E-mini S&P 500 contract for roughly $1,200 on margin to hold a $25,000 position.
MIN CAPITAL REQUIRED
$1,200
EFFICIENCY RATIO
~20:1
Trading ETFs
When purchasing S&P 500 ETFs, traders will need to put up 50% – 100% of their own capital, depending on if they trade with Reg T margin.* In the least capital-intensive scenario, traders can borrow $12,500 on Reg T margin and put up $12,500 of their own capital.
MIN CAPITAL REQUIRED
$12,500*
EFFICIENCY RATIO
2:1
Trading a basket of stocks
If a trader wants to trade $25,000 worth of individual stocks instead of a broad index, they must fully fund the position or borrow up to 50% of the capital required from their broker using Reg T margin, similar to ETFs.
MIN CAPITAL REQUIRED
$12,500*
EFFICIENCY RATIO
2:1
*Assuming traders have an approved brokerage account for Reg T margin
Need more training to trade futures? Jump-start your journey with these resources
Create a free account to take the next steps to learn how to trade futures and get more familiar with the markets.
Take a test drive in the Trading Simulator
The best way to learn is to practice. Start trading Equity futures in a risk-free environment that leverages real market data.
Key Figures
Find the futures contract that suits your needs
CME Group offers two sizes, including the Micro E-mini and E-mini Equity Index contracts. The Micro contracts trade at 1/10 the size of the E-mini contract, as seen in the contract multiplier below.
The multiplier of a futures contract determines the notional value, which is the contract’s total value. To trade, you only need to deposit the margin requirement, which is a small fraction of the total value. Price movements occur in minimum tick values, where each tick has a set monetary worth.
FAQ
Courses and learning
Learn more about trading Equity Index futures with these lessons from CME Institute.
*CME Group Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
