Dancing With The Emini
Maximizing The Mini
by Mike Paulenoff
Here's a look at a successful short-term trade on the emini contract.
One morning in June, with the Standard & Poor's 500 riding a nearly four-week uptrend, a friend of mine decided to bet the market would decline. Rather than short the cash index through funds or exchange-traded funds (ETFs) that track the S&P 500, Tom decided to trade the index futures, where he has far more margin power and where nearly round-the-clock trading enables him to buy before the cash market opens. His early morning price on the S&P futures was 1143 or, as it turned out, 41/2 points higher than the S&P 500's opening price.
Rather than the regular S&P index futures contract, Tom bought the emini S&P contract, which is one-fifth the contract size and requires far less money down on margin. A single regular S&P contract, which is valued at $250 per point (or about $275,000 on a price of 1,100), requires about $20,000 in margin ($5,000 if you're not holding overnight). An emini contract, valued at $50 per point, requires about $4,000 if held overnight, and far less if daytrading. You can daytrade up to 49 emini contracts for $500 on Global Futures Exchange, though the added leverage, of course, increases risk.
Figure 1: 15-minute chart of June emini S&P contract. The emini continues to stairstep higher and in doing so, has carved out a micro uptrend consisting of higher highs and higher lows within the 1080 and 1095 range. A breach of the trendline of the lower trendline suggests a decline may be emerging.
...Continued in the October issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the October 2004 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2004, Technical Analysis, Inc.
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