Friday Market

Day traders trade a lot of markets. One of the favorite contracts that day traders love to trade are the stock index futures contracts. Currently there are more than 70 stock index futures contract that get traded on at least 20 exchanges in the world. The most famous stock index futures contracts are the S&P 500 futures, NASDAQ 100 futures, Dow futures, DAX futures and so on. As a day trader, you can trade these contracts and make a fortune. You don’t even need to use leverage with these contracts as it is inbuild into them. Now, you don’t need to trade all these contracts. What you can do is master trading one or at most two and become an expert on them.

So stock index futures are contracts based on indexes that are composed of stocks. For example, S&P 500 futures are based on the famous S&P 500 Stock Index; a group of 500 commonly traded US stocks. When you are trading stock index futures, you are betting on the general direction of the market not on some individual stocks. This way you are blocking out a good deal of noise that is associated with the daily gyrations in the stock prices. Stock index futures are used for both hedging as well as speculation. Stock index futures are used by hedge fund managers in hedging their stock portfolios.

The most popularly traded stock index futures contract is the S&P 500 futures. It trades on the Chicago Mercantile Exchange (CME). S&P 500 Index is made up of 400 industrial companies, 40 financial companies, 40 utilities and 20 transportation companies offering a fairly diversified view of the US economy. One tick on S&P 500 contract is worth . So there is an inbuilt element of leverage in these futures contract.

If the S&P 500 Stock Index moves one point, you either make 0 or lose 0 depending on which side of the market you were. These contracts also get traded on the GLOBEX Electronic Platform after the regular trading hours. Margin requirements can vary. If the S&P 500 Index is at 1000 points, the contract is worth 0*1000=0,000. A huge amount for most of the day traders.

NASDAQ-100 Futures Index contract is the second most popular stock index futures contract. It is based on the famous NASDAQ 100 Index that includes many technololgy and biotech firms. The margin requirements for this contract maybe too high for most day traders. Similarly, Dow Futures are written on DJIA. Due to these facts, a mini version of these contracts was introduced.

Most of the day traders can easily trade the e-mini version of these contracts that get traded on GLOBEX around the clock 24 hours. These mini versions have low margin requirements that is only one fifth of the regular contracts.