CME Group first launched Micro E-mini futures contracts in May 2019 to make futures trading more accessible to sophisticated, active traders seeking additional liquidity and flexibility in their trading strategy. Micro E-mini futures are the most successful products ever launched in CME Group’s history, trading more than 850 million cumulative contracts in just two years.
Greater Precision, Proper Allocation
Micro E-mini futures contracts are offered at one-tenth the contract size of their E-mini counterparts and can be converted at a ratio of 10:1 or vice versa. Prior to the launch of Micro E-minis, futures traders could still adjust their exposures, hedge a position or move into other positions, but not as precisely as they might desire. Now, with the introduction of Micro E-minis, traders can actively manage their strategies with greater precision and try to ensure that their portfolios are properly allocated in all market conditions. Not only do the smaller contract sizes provide enhanced liquidity and flexibility, they can also help reduce traders’ risk during more uncertain and volatile times like earnings season.
Around the Clock Adjustments
Micro E-mini futures contracts are offered at one-tenth the contract size of their E-mini counterparts and can be converted at a ratio of 10:1 or vice versa. Prior to the launch of Micro E-minis, futures traders could still adjust their exposures, hedge a position or move into other positions, but not as precisely as they might desire. Now, with the introduction of Micro E-minis, traders can actively manage their strategies with greater precision and try to ensure that their portfolios are properly allocated in all market conditions. Not only do the smaller contract sizes provide enhanced liquidity and flexibility, they can also help reduce traders’ risk during more uncertain and volatile times like earnings season.
Risk-Reward Ratio
Among other factors, at the forefront of every successful futures trading strategy is a particular risk-reward ratio that must be met in order to place a trade. Although that number may differ from trader to trader, the need for that benchmark does not. In today’s day and age information moves freely and quickly, and even a sound strategy with the proper risk-reward profile can turn sour quickly.
It is at this point when traders need to have the flexibility to adjust their portfolios, and the introduction of Micro E-mini futures contracts gives traders the opportunity to fine-tune positions in a way that wasn’t possible before. Whether adding 10% exposure to an existing position or hedging 60% of a position, the ability to trade micros quickly and easily around the clock adds liquidity and flexibility to the futures markets.
The integration of Micro E-mini contracts over the past several years has allowed traders around the world the opportunity to better participate in futures trading and potentially gain exposure to the U.S. markets in a way that was previously unavailable. It is a major and welcome development for active traders and one for which earnings seasons is a particularly strong use case.
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All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).
