E-mini S&P 500 Futures Strategy (Backtest And Example)

Last Updated on December 5, 2022

One of the most frequently traded futures contracts, the E-mini S&P 500 futures tracks the popular S&P 500 index, which is an index of the 500 biggest stocks in the US stock market. Just as the S&P 500 index is considered the benchmark of the US equity market, the E-mini S&P 500 futures strategy is considered the industry standard in equity futures trading.

An E-mini S&P 500 futures strategy refers to the methodology or technique you can use to profitably trade S&P 500 futures, and this often includes technical and fundamental analyses for market timing and risk management. The E-mini S&P 500 futures are financial derivative products that represent a contract to buy or sell a specified amount of the S&P 500 index on a future date, at a pre-agreed price. Trading on the CME Globex platform, the contract allows you to take positions on the direction of the S&P 500 index, either for speculation or hedging purposes.

In this post, we answer some questions about the E-mini S&P 500 futures strategy. We also provide an example of a strategy with a corresponding backtest of it.

What is the E-mini S&P 500 futures?

The E-mini S&P 500 futures are financial derivative products that represent a contract to buy or sell a specified amount of the S&P 500 index on a future date, at a pre-agreed price. Introduced in 1997, the contract is 1/5th the size of the standard S&P 500 futures that was launched by the Chicago Mercantile Exchange in 1982.

The e-mini futures has become the most frequently traded equity index futures, as it makes futures trading more accessible to more retail traders, making it one of the most liquid futures on the CME platform. The contract allows investors to hedge their exposure in the equity market while providing short-term traders with the opportunity to speculate and profit from price fluctuations.

What is an E-mini S&P 500 futures strategy?

An E-mini S&P 500 futures strategy is a method or technique for trading the S&P 500 futures market. It would include technical and fundamental analyses for market timing, position sizing, and risk management.

If you want to trade index futures profitably, you must have a solid trading strategy. Your strategy for E-mini S&P 500 futures must include precise entry and exit signals, as well as risk management techniques. Your strategy may include speculating or hedging risks with the index futures, but it may also include arbitrage or spread trading.

E-mini S&P 500 futures strategy backtest

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

What is the seasonality of E-mini S&P 500 futures?

Seasonality is a concept in financial trading that describes the tendency of an asset’s price to move in a fairly predictable pattern during certain times of the year. Periods can refer to months or seasons (winter, spring, summer, and fall) of the year.

E-mini S&P 500 futures trading strategy
Source: Seasonalcharts.com

From the chart above, you can see that the S&P 500 futures tend to do better in winter and spring than during the summer.

What moves the E-mini S&P 500 What affects the E-mini S&P 500 the most?

There are many factors that can affect the E-mini S&P 500 futures, and these are some of them:

  • The movement of the component stocks: The S&P 500 index is a market-capitalization-weighted index, so the index movement is more dependent on the movement of higher-cap stocks than on the lower-cap stocks.
  • Interest rate changes: Changes in interest rates can affect stock prices and move the S&P 500 futures.
  • Economic news: Macroeconomic news reports, such as GDP growth rates, manufacturing index, and so on, affect the movement of the S&P 500 futures.
  • Value of the U.S. dollars: Most times, the value of the S&P 500 index rises when the USD is depreciating and falls when the USD is appreciating.

How are E-mini S&P 500 futures traded?

The E-mini S&P 500 futures contracts are traded on the CME Group’s exchange, and through CME’s Globex electronic platform, the contract can be traded from anywhere. The contract trades from Sundays to Fridays from 6:00 p.m. to 5:00 p.m. ET (5:00 p.m. to 4:00 p.m. CT) the next day, with a one-hour break at the end of each day.

There are quarterly contracts (Mar, Jun, Sep, and Dec) listed for 9 consecutive quarters plus 3 additional December contract months. 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 S&P 500 futures?

You need a futures broker that would grant you access to the CME exchanges where the E-mini S&P futures contracts are traded. The broker also helps clear your trades. So, the first step to start trading E-mini S&P 500 futures is to register with a futures broker and fund your account. Since futures contracts are leveraged instruments, you need not have the full dollar worth of the contract before you can trade it — you deposit the initial margin or a little more than that.

If you just want to speculate on price fluctuations, Some CFD brokers, like IG, offer E-mini S&P 500 futures CFDs. With a CFD contract, you are in an agreement with the broker to exchange the price difference between the opening and closing of a trade.

What is the E-mini S&P 500 trading at?

As of November 30, 2022, the E-mini S&P 500 futures were trading at $4020.25. 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 S&P 500 futures hour?

The E-mini S&P 500 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.

The trading hours for BTIC is Sunday to Friday, from 6:00 p.m. to 4:00 p.m. ET. 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?

You can find the chart 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.

You can also use Yahoo Finance, which offers free chart services or subscribe to trading charts through a paid third-party platform like MultiCharts.

What are the trading symbols for E-mini S&P 500 futures?

The trading symbol for the full contract is ESZ2. The product codes for the different services are as follows:

  • CME Globex: ES
  • CME ClearPort: ES
  • Clearing: ES
  • BTIC: “EST”,”ESQ”

What is the specification for E-mini S&P 500 futures contract?

A contract of the E-mini S&P 500 futures (ES) 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.

The contracts come in quarterly cycles of Mar, Jun, Sep, and Dec, with contracts listed for 9 consecutive quarters plus 3 additional December contract months. Contracts are financially settled. Trading terminates at 9:30 a.m. ET on the 3rd Friday of the contract month. BTIC trading terminates at 4:00 p.m. ET on the Thursday before the 3rd Friday of the contract month, while TACO trading terminates at 9:30 a.m. ET on the same Thursday before the 3rd Friday of the contract month.

Why should you start trading E-mini S&P 500 futures?

Some of the reasons to trade E-mini S&P 500 futures contracts include the following:

  • Hedging risk: You can use it to hedge your position in the equity market — most institutional investors use this approach
  • Diversification: As an investor, you can use it to diversify your investment portfolio
  • Speculation: As a trader, you can use it to speculate on the direction of the S&P 500 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 S&P 500 ETFs on the equity market.

What is the contract size?

One contract unit of the E-mini S&P 500 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 example, given that the current quote is 4020.25, as of writing, the USD worth of one contract unit of the E-mini S&P 500 futures (ES) would be $50 x 4020.25 = $201,012.5.

What is the tick size?

The tick size of one contract of the E-mini S&P 500 futures is $12.50 for outright trading on Globex and $2.50 for BTIC, TACO, and Calendar Spread.

What is the minimum price fluctuation for E-mini S&P 500 futures?

The minimum price fluctuation for E-mini S&P 500 futures is 0.25 index points for outright trading on Globex and 0.05 index points for BTIC, TACO, and Calendar Spread.

Are there any ETFs?

Yes, these are some of them:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)

What factors affect E-mini S&P 500 prices?

Many factors can affect E-mini S&P 500 futures prices, and these are some of them:

  • The movement of the highly weighted component stocks of the index, such as Apple, Microsoft, and Amazon
  • Macroeconomic reports, such as CPI, GDP growth rate, interest rates, and so on
  • Interest rate changes
  • The state of the economy
  • sociopolitical events

What is the all-time high for E-mini S&P 500 futures?

Based on the TradingView chart for E-mini S&P 500 futures, the all-time high of this contract is 4808.25, which it reached in January 2022.

What are the biggest risks in trading E-mini S&P 500 futures?

The biggest risk when trading any type of futures, including the E-mini S&P 500 futures, comes from adverse price movement. Since futures are leveraged instruments, the losses are calculated using the actual value of the contract size traded, not the margin deposited. So, if you trade with a 20x leverage, a 1% adverse movement would lead to a 20% loss, and a 5% negative movement would result in a 100% loss in your account (wipe out your account).

What is the settlement method?

Financially settled

What is the settlement procedure?

The settlement procedure is by cash and is calculated based on 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 S&P 500 futures?

There is no block trade eligibility for this contract.

What is the difference between E-mini S&P 500 futures and the Forex instrument for E-mini S&P 500?

Some online brokers offer CFD trading in E-mini S&P 500 futures. CFD trading differs from futures in that futures contracts have fixed expiration dates, but CFDs can be traded indefinitely. Not every CFD broker offers E-mini S&P 500 CFD though. Some offer CFDs that just track the S&P 500 index, and not the futures contract.

Which forex instrument is the same as E-mini S&P 500 futures

E-mini S&P 500 CFD

What are some important dates for this market?

These are a few of the important dates for the E-mini S&P 500 index futures market:

  • 1957 when the S&P 500 Index was created
  • 1982 when the S&P 500 futures were introduced
  • 1997 when the E-mini contract debuted on the CME platform
  • January 2022 when the index futures market made its all-time high of 4808.25

What is the highest E-mini S&P 500 has ever been its all-time high?

Based on the TradingView chart for E-mini S&P 500 futures, the highest level the S&P 500 index has ever reached is 4808.25, which happened in January 2022.

What is the lowest E-mini S&P 500 has ever been its all-time low?

Based on the TradingView chart for E-mini S&P 500 futures, the lowest level the e-mini S&P 500 index futures has ever reached is 665.75, which happened in March 2009.

Conclusion

While trading equity index futures is a good way to diversify your trading portfolio and potentially make more money, if you want to trade the S&P 500 futures, it is important to use the right E-mini S&P 500 futures strategy.

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