Index Futures and Emini Trading
The core of my trading activity centers around the index futures contracts. There are a wide range of index futures contracts to trade and each has a distinct personality. I concentrate my trading activities on three main financial contracts. Though there are futures contracts on all sorts of commodities, ranging from corn to energy to currencies.
1. S and P 500 (symbol ES) 1 point (4 ticks)=$50
2. Nasdaq 100 (symbol NQ) 1 point (4 ticks)=$20
3. Dow 30 (symbol YM) 1 point (1 tick) =$5
Often times I will ask traders just what exactly is an index contract and the wide variety of responses I hear is a source of concern. The fact of the matter, I am convinced, is that not many people know what they are trading and rollover and expiration rules.
Here are some important facts for your consideration:
* Rollover is 8 days before expiration.
* Expiration is the third Friday of each quarter month (March, June, September, December)
* The contract letter associated with each month is: March=H June=M September=U December=Z
* Rollover is on a Thursday.
* Rollover is usually on the second Thursday of the month but will be on the first Thursday if the first day of the month falls on a Friday
* Volume shifts to the new contract at market open (09:30 EST) on Rollover day
* New day trading or swing trading positions opened on rollover day should use the new contract month irrespective of when you plan to close it.
* New swing positions might be better opened using the new contract if opened within a few days of rollover day.
* Market myths abound at rollover and expiration. Check the source and confirm the probabilities before believing anything.
All of the financial indexes are composites of the larger contract traded on the floor of the Chicago Mercantile Exchange. The “E” before each of the contracts indicates that it is electronically traded.
The indexes, then, are composites of groups of stocks and may be weighted by the capitalization of the stock in the composite, depending upon the index your are trading. A index futures contract is a derivative, not a direct investment. With all the talk of the horrors of derivative, many are shocked to learn the futures contracts are, in fact, a form of derivative.
So enjoy your trading of index futures contract and be aware of what you are trading and how the contracts rollover every three months.
