On May 6, 2010, shortly after 2:30 pm, investors, traders, online gawkers and global markets, were transfixed with what was happening with the Dow, especially the futures trading sector. In a matter of minutes, the Dow dropped hundreds of points. Traders started to panic, loudly wondering what was causing the plunge.

In Congressional hearings later that week, the Chairman of the Commodity Futures Trading Commission revealed, that during that crucial time period leading to the Dow’s plunge, a single futures trader accounted for about 9 percent of trading volume (sale of about 75,000 E-mini contracts) in the most actively traded stock index derivative contract, known as the 500 e-mini futures contract. The company was later identified in a Chicago Mercantile Exchange document. No, it was not a Wall Street company this time.

For some people, it was the first time they’ve ever heard of the term, 500 e-mini futures. But for savvy futures trading investors, this is a sector of the market that brings huge profits for people who know what they’re doing.

E-mini S&P, which is often abbreviated to E-mini, is a stock market index futures contract traded on the Chicago Mercantile Exchange’s Globex electronic trading platform and on the New York Board of Trade. E-minis are available on a wide range of stock market indexes, commodities and currencies.

The notional value of one contract is US$50 times the value of the S&P 500 stock index. Futures trading on the E-minis is very active, that is why the chance of huge profits for investors is a daily reality.

The E-minis became a vehicle for small investors wanting a way in on futures trading. It soon became the most popular equity index futures contract in the world. According to a recent study, the implied volume of the E-mini is over $140 billion, which easily exceeds that dollar volume of the S&P 500 stocks.

Because of the success of the E-mini S&P, the exchange introduced the E-mini NASDAQ-100 contract, allowing futures trading for the smaller speculators.

Why E-minis are the perfect vehicle for futures trading:

  • There is high liquidity in the E-minis which means there is a tight spread so losses are mitigated.Futures trading is sometimes volatile, the E-minis, though averaging 1000 contracts a day in 44 unique contracts, are insulated from this volatility.
  • There is greater affordability for investors because of lower margin requirements.
  • There is round-the-clock trading, 23.25 hours a day, from Sunday afternoon to Monday afternoon. The market is literally, open all day.
  • There are tax advantages on the E-minis. Under U.S. tax laws, E-minis may qualify as 1256 Contracts, and thus have built-in tax advantages.

The E-minis are still part of the bigger futures trading and futures contract. Futures contracts are for hedging risks but also for speculation. Oil prices, crude and natural gas, the precious metals, agriculture and commodities are all actively traded. Futures trading, specifically the E-minis, are a perfect vehicle for someone wanting to try this sector.

Huge profits await the savvy investor. But a lot of work is also required. Analyzing market trends and studying historical quotes – the 52-week Highs and Lows will make futures trading less risky for the average investor.

Like all investments, past performance does not guarantee future performance, but if you find that sweet spot, then you’re on your way of making huge profits on futures trading.