E-Mini Russell 2000 Index Futures Strategy (Backtest And Example)

Last Updated on December 5, 2022

Created in 1984 by the Frank Russell Company but now maintained by FTSE Russell, the Russell 2000 Index is a broad-based, market-cap-weighted index that tracks the performance of two thousand of the smallest-cap US companies in the Russel 3000 Index. As with other equity indexes, one common way to trade the index is via E-mini Russell 2000 Index futures. But what is an E-mini Russell 2000 Index futures strategy?

An E-mini Russell 2000 Index futures strategy is the methodology or technique you can use to profitably trade Russell 2000 Index futures, and this often includes technical and fundamental analyses for market timing and risk management. E-mini Russell 2000 Index futures are financial derivative products that represent a contract to buy or sell a specified amount of the Russell 2000 Index on a future date, at a pre-agreed price. The contract trades on the CME Globex platform, and it allows you to take positions on the performance of the Russell 2000 Index, either for speculation or hedging purposes.

In this post, we answer some questions about the E-mini Russell 2000 Index futures strategy. We end the article with both a backtest and an example.

Table of contents:

What are E-mini Russell 2000 Index futures?

The Russell 2000 Index futures are financial derivative products that represent a contract to buy or sell a specified amount of the Russell 2000 Index on a future date, at a pre-agreed price. It was launched in 1993 to provide active traders with a way to participate in the U.S. small-cap equity markets through futures contracts.

Apart from the standard contract, CME offers other versions of the contract, including the E-mini Russell 2000 futures and Micro E-mini Russell 2000 futures to allow traders of all shapes and sizes to trade the asset, providing more liquidity and efficiency.

The E-mini Russell 2000 Index futures refers to a futures contract whose underlying asset is the Russell 2000 Index to the tune of $50 x the index value per contract unit. It is a smaller unit of the Russell 2000 Index futures. The contract trades on the CME Globex platform, and it allows you to take positions on the performance of the Russell 2000 Index, either for speculation or hedging purposes.

The Russell 2000 index is generally considered a key benchmark for small-cap U.S. stocks, so it can be used to hedge or speculate on U.S. small-cap companies. The E-mini Russell 2000 Index Futures allows you to take positions on the performance of the Russell 2000 Index with a lower amount than is required for the standard contract size.

What is an E-mini Russell 2000 Index futures strategy?

An E-mini Russell 2000 Index futures strategy is the methodology or technique you can use to profitably trade Russell 2000 Index futures, and this often includes technical and fundamental analyses for market timing, position sizing, and risk management.

You must have a solid trading strategy if you want to trade index futures profitably. Your E-mini Russell 2000 index futures strategy must include precise entry and exit signals, as well as risk management techniques. Your approach may be to speculate or to hedge risks using the index futures, but it can also include arbitrage or spread trading.

E-mini Russell 2000 Index futures strategy backtest

A backtest with strict trading rules, settings, statistics, and historical performance is coming soon.

What is the seasonality of E-mini Russell 2000 Index futures?

In financial trading, seasonality is a concept that explains the tendency of an asset’s price to move in a fairly predictable way during certain periods of the year. The periods may refer to the months or seasons (winter, spring, summer, and fall) of the year.

The E-mini Russell 2000 index futures tend to perform better during the spring than during the summer. The months of August and December are also better than other months in their respective seasons. See the chart below:

E-Mini Russell 2000 Index Futures Strategy
Source: Equity Clock

What moves the E-mini Russell 2000 Index What affects the E-mini Russell 2000 Index the most?

Many factors that can affect the E-mini Russell 2000 Index futures, and these are some of them:

  • How the component stocks move: Being a market-capitalization-weighted index, the Russell 2000 Index’s movement is more dependent on the movement of higher-cap stocks than on the lower-cap stocks.
  • Changes in interest rates: Changes in interest rates can affect stock prices and move the Russell 2000 Index.
  • Economic news: Macroeconomic news reports, such as GDP growth rates, manufacturing index, and so on can affect the movement of the index.
  • Value of the U.S. dollars: The value of the index is likely to rise when the USD is depreciating and fall when the USD is appreciating.

How are E-mini Russell 2000 Index futures traded?

The E-mini Russell 2000 Index futures contracts are traded on the CME Group’s exchange. The contract trades from Sundays to Fridays from 6:00 p.m. to 5:00 p.m. ET the next day, with a one-hour break at the end of each day. Through CME’s Globex electronic platform, the contract can be traded from anywhere.

The contracts come in quarterly cycles of Mar, Jun, Sep, and Dec, with contracts listed for five consecutive quarters. One contract unit is equivalent to the current value of the index multiplied by $50. The price quotation is in USD and cents per index point. The contract is financially settled, and trading terminates at 9:30 a.m. ET on the 3rd Friday of the contract month.

How do you start trading E-mini Russell 2000 Index futures?

You can trade the E-mini Russell 2000 contract through a futures broker, which would grant you access to the CME exchange where the contract is traded. So, to start trading the contract, you have to register with a futures broker and fund your account. Since futures are leveraged instruments, you don’t need to have the total worth of the contract to start trading it — a little above the required initial margin is all you need.

Another option is to trade the CFD that tracks the E-mini Russell 2000 Index futures, which is offered by some CFD brokers like IG. You can trade such CFD of futures contracts if you think you can trust a CFD broker. One good thing about CFDs is that they enable you to trade price fluctuations without having to worry about contract expiry.

What is the E-mini Russell 2000 Index trading at?

As of November 30, 2022, the E-mini Russell 2000 futures were trading at $1841.2. See the chart here on the CME platform chart. The chart was gotten from TradingView.

Since the price changes from time to time, what is quoted here may not be the price it is trading now you are reading this post. You can click on any of the links to get the real-time price on the CME platform or directly from TradingView.

What’s E-mini Russell 2000 Index futures hour?

The E-mini Russell 2000 Index futures trade on the CME Globex electronic platform from Sundays to Fridays, from 6:00 p.m. to 5:00 p.m. ET the next day. There is a one-hour break before the start of the next trading day (5:00 p.m. – 6:00 p.m. ET) from Monday to Thursday for maintenance.

For CME ClearPort, the schedule is Sunday – Friday, 6:00 pm – 5:15 pm ET the next day. There is a 45–minute break each day beginning at 5:15 pm.

For TACO, Sunday – Friday 6:00 p.m. – 9:30 a.m. ET. Monday – Friday 11:00 a.m. – 5:00 p.m. ET

Where can I find trading charts?

The chart is available on any trading platform that provides chart services. If your platform does provide charts, you can use TradingView, which provides free access to the charts of various instruments. However, to connect TradingView to your broker, you must subscribe to its Pro services. From the CME platform, you can also access the TradingView chart.

Also, Yahoo Finance is another place where you can find E-mini Russell 2000 futures charts. You can also subscribe to trading charts through a paid third-party platform like MultiCharts.

What are the trading symbols for E-mini Russell 2000 Index futures?

The trading symbol for the full contract is ZBZ2. The product codes for the different services are as follows:

  • CME Globex: RTY
  • CME ClearPort: RTY
  • Clearing: RTY
  • BTIC: “RLT”,”RTQ”

What is the specification for E-mini Russell 2000 Index futures contract?

One contract of the E-mini Russell 2000 index futures (RTY) is equivalent to the product of the index’s value and $50 ($50 x the current value of the index). The price quotation is in U.S. dollars and cents per index point.

There are quarterly contracts (Mar, Jun, Sep, Dec) listed for 5 consecutive quarters. The same for TACO contracts. Contracts are cash settled. Trading terminates at 9:30 a.m. ET on the 3rd Friday of the contract month, while BTIC trading terminates at 4:00 p.m. ET on the Thursday before the 3rd Friday of the contract month. TACO trading terminates at 9:30 a.m. ET on the Thursday before the 3rd Friday of the contract month.

Why should you start trading E-mini Russell 2000 Index futures?

There are many reasons to trade E-mini Russell 2000 Index futures contracts. Here are some of them:

  • You can use it to hedge your position in the equity market — most institutional investors use this approach
  • As an investor, you can use it to diversify your investment portfolio
  • As a trader, you can use it to speculate on the direction of the Russell 2000 index and profit from the price fluctuations — since futures allow you to trade on margin, you can potentially make more profits trading it than trading Russell 2000 ETFs on the equity market.

What is the contract size?

A contract unit of the E-mini Russell 2000 futures is equivalent to $50 x the index’s value. So, the dollar worth of a contract depends on the current quote of the index. For the current quote of 1841.2, as of writing, the USD worth of one contract unit of the E-mini Russell 2000 index futures (RTY) would be $50 x 1841.20 = $92,060.

What is the tick size?

The tick size of one contract of the E-mini Russell 2000 Index futures is $5.00 for outright trading on Globex and $2.50 for BTIC, TACO, and Calendar Spread.

What is the minimum price fluctuation for E-mini Russell 2000 Index futures?

The minimum price fluctuation for E-mini Russell 2000 Index futures is 0.10 index points for outright trading on Globex and 0.05 index points for BTIC, TACO, and Calendar Spread.

Are there any ETFs?

Yes, there are many. These are some of them:

  • BlackRock’s iShares Russell 2000 ETF (IWM)
  • Vanguard’s Russell 2000 ETF (VTWO)
  • Direxion Daily Small Cap Bull 3x Shares (TNA)

What factors affect E-mini Russell 2000 Index prices?

The factors that affect E-mini Russell 2000 index prices include:

  • The movement of the highly weighted component stocks of the index
  • Macroeconomic reports
  • Interest rate changes
  • The state of the economy
  • sociopolitical events

What is the all-time high for E-mini Russell 2000 Index futures?

According to the TradingView chart for E-mini Russell 2000 Index futures, the all-time high is 2460.8, which it reached in November 2021.

What are the biggest risks in trading E-mini Russell 2000 Index futures?

When trading any type of futures, the biggest risk is from adverse price movement. Futures are leveraged instruments, so the losses are calculated using the actual value of the contract size traded. If you trade with a 20x leverage, a 5% negative movement results in a 100% loss in your account.

What is the settlement method?

The contract is financially settled.

What is the settlement procedure?

The settlement is by cash to the special opening quotes of the index on the day of final settlement which is normally the third Friday of the contract month.

What is the block minimum for E-mini Russell 2000 Index futures?

40 contracts

What is the difference between E-mini Russell 2000 Index futures and the CFD instrument for E-mini Russell 2000 Index?

CFD trading differs from futures in that futures contracts have fixed expiration dates, while CFDs can be traded indefinitely.

Which forex instrument is the same as E-mini Russell 2000 Index futures

E-mini Russell 2000 Index CFD

What are some important dates for this market?

These are a few of the important dates for the E-mini Russell 2000 index futures market:

  • 1984 when the Russell 2000 Index was created
  • 1993 when the Russell 2000 index futures were introduced
  • 2017 when the E-mini contract debuted on the CME platform
  • November 2021 when the index futures market made its all-time high of 2460.8

What is the highest E-mini Russell 2000 Index has ever been its all-time high?

According to the TradingView chart for E-mini Russell 2000 Index futures, the highest level the E-mini Russel 2000 index futures has ever reached is 2460.8, which happened in November 2021.

What is the lowest E-mini Russell 2000 Index has ever been its all-time low?

According to the TradingView chart for E-mini Russell 2000 Index futures, the lowest the contract has traded is 2460.8, which happened in November 2021. But the all-time low of the underlying Russel 2000 index is 106.07, which happened in October 1987.

Conclusion

Trading equity index futures is a good way to diversify your trading portfolio and potentially make more money. If you want to trade Russell 2000 futures, it is important to use the right E-mini Russell 2000 Index futures strategy.

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