Micro E-mini Russell Futures Strategy (Backtest And Example)

Last Updated on December 22, 2022

The micro E-mini Russell futures offer cheaper access to the Russell 2000 index futures market than the e-mini version. Russell 2000 is a small-cap market index that is made up of the bottom 2,000 companies in the Russell 3000 index. Created in 1984 by the Frank Russell Company, the index is considered an indicator of the U.S. economy due to its focus on small-cap companies in the U.S. market. If you want to trade this contract, you will need a micro E-mini Russell strategy.

A micro E-mini Russell futures strategy refers to the trading approach you can use to trade the micro E-mini Russell futures profitably. This strategy will often employ the use of technical or fundamental analysis to time your entry into the market with a proper application of risk management and position sizing practices. You can use this strategy to speculate on the Russell 2000 index, hedge your risk exposure in the U.S. equity market, or diversify your investment portfolio.

In this post, we answer some questions about the Micro E-mini Russell futures strategy and we also make a backtest to show you can trade it.

Table of contents:

What are Micro E-mini Russell futures?

The micro E-mini Russell futures is a futures contract in which the underlying asset is the Russell 2000 stock index — an index of the smallest 2,000 companies in the Russell 3000 index. A futures contract is an agreement between a buyer and seller to purchase a particular amount of the underlying asset at a future price in the future. Micro E-mini Russell futures are 1/10th the size of the standard E-mini Russell futures.

The micro E-mini Russell futures was launched in May of 2019 as a way of providing a low-cost entry to trading the Russell 200 index for traders with relatively small capital. Because of this, traders can get access to the American equities market without breaking their purses.

What is a Micro E-mini Russell futures strategy?

A micro E-mini Russell futures strategy is the techniques or methodologies that you can apply to trade the Russell 2000 index profitably. The strategy often involves using technical analysis or fundamental analysis to time the market together with proper risk management and position sizing practice.

To trade the micro E-mini Russell futures profitably, you need to have a solid trading strategy that outlines precise entry and exit points, risk management, and position sizing techniques. With the strategy, you can speculate on the direction of the index, diversify your portfolio, or hedge your exposure in the equity market.

Micro E-mini Russell futures strategy backtest

A strategy backtest with trading rules and settings is coming shortly.

What is the seasonality of Micro E-mini Russell futures?

Seasonality in trading is a term that refers to the tendency of the price of an asset to behave in a fairly predictable pattern within a particular period. The period could refer to months of the year of seasons such as summer, winter, autumn, and spring as well as holidays.

Looking at the chart below, it can be seen that this contract tends to perform from March and then peak in early June. Also, the first two months of the year seem to be a bad time to invest in the market.

Micro E-mini Russell futures strategy
Source: EquityClock

What moves the Micro E-mini Russell market — What affects the Micro E-mini Russell market the most?

The micro E-mini Russell futures is market-cap weighted therefore any change in the market value of its component stocks will affect the index’s movement. Since the index is composed of companies in the United States, the performance of the USD can affect its value. Equally, the market is affected by macroeconomic news releases such as the Fed rates policy, inflation data, employment reports, and GDP growth rate. Additionally, political tensions can and natural disasters can have adverse effects on the index growth.

How are Micro E-mini Russell futures traded?

The micro E-mini Russell futures contract can be traded on the CME Globex platform from Sunday 6:00 p.m. – Friday – 5:00 p.m. ET (5:00 p.m. – 4:00 p.m. CT) with a daily break period from 5:00 p.m. – 6:00 p.m. ET (4:00 p.m. – 5:00 p.m. CT).

One contract unit for the micro E-mini Russell futures is equivalent to the value of the Russell 2000 index multiplied by $5. The price is quoted in USD and cents per index point on the CME Globex platform. The minimum price fluctuation of the index is 0.10 index points which translates to a tick size of $0.50 per contract.

The contracts come in four quarters (March, June, September, and December) which are listed for 5 consecutive contract months. Trading usually terminates at 9:30 a.m. ET on the third Friday of the contract month, and contracts are settled financially upon expiration.

How do you start trading Micro E-mini Russell futures?

To trade the micro E-mini Russell futures, you need to have an account with a broker that can grant you access to the CME platform where the contracts are traded. So, open an account with a futures broker and fund it. Since futures are leveraged products, you do not need to have large capital before you begin trading this contract. You only need to deposit the margin required to open a position which is a fraction of the contract’s total worth.

You can also trade the CFD (Contract for Difference) that follows the price of the Russell 2000 index, which is offered by some forex brokers, such as IG and AvaTrade. Note that CFDs are contracts between you and the broker to exchange the difference in price between the opening and closing of a trade. By trading CFDs, you are at the mercy of your broker.

What is the Micro E-mini Russell trading at?

As of December 19, 2022, the micro E-mini Russell futures was trading at $1770.60. See the chart here on the CME platform. You can also see the live chart on TradingView.

Note that due to the nature of the market, prices fluctuate from time to time and what was quoted here may not be the same when you read this post. To view the live chart, simply click on any of the above links and you will be taken to the CME platform or TradingView.

What’s Micro E-mini Russell futures hour?

The micro E-mini Russel; trades electronically on the CME Globex exchange platform from Sunday 6:00 p.m. – Friday – 5:00 p.m. ET (5:00 p.m. – 4:00 p.m. CT) with a daily break period from 5:00 p.m. – 6:00 p.m. ET (4:00 p.m. – 5:00 p.m. CT).

For CME ClearPort, the trading schedule is from Sunday 6:00 p.m. – Friday – 5:00 p.m. ET (5:00 p.m. – 4:00 p.m. CT) with a daily break period from 5:00 p.m. – 6:00 p.m. ET (4:00 p.m. – 5:00 p.m. CT) for maintenance.

Where can I find trading charts?

You can find the trading charts for the micro E-mini Russell futures on any trading platform that offers chart services. Normally, your trading platform should provide you with one, but if they don’t you can make use of TradingView to view the price chart for free. If you want to connect TradingView to your trading platform, you will be required to subscribe to their pro services. Additionally, you can access the TradingView chart from the CME platform.

You can also make use of other chart services such as Yahoo Finance, which offers free access to charts. If you like, you can subscribe to a paid charting service like Multicharts.

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

The trading symbol for the micro E-mini futures are given below:

  • CME Globex: M2K
  • CME ClearPort: M2K
  • Clearing: M2K

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

One contract unit of the micro E-mini Russell futures (M2K) is equivalent to the value of the index multiplied by $5.00 (index’s value X $5.00). The price is quoted in US dollars and cents per index point with a minimum price fluctuation of 0.10 index point, which is equivalent to $0.50.

The contracts come in four quarters (March, June, September, and December) which are listed for 5 consecutive contract months. Trading usually terminates at 9:30 a.m. ET on the third Friday of the contract month, and contracts are settled financially upon expiration.

Why should you start trading Micro E-mini Russell futures?

The micro E-mini Russell futures provides are a cheaper alternative to trading the standard E-mini Russell futures. It provides more flexibility with position sizing and risk management to small accounts traders. Here are some of the reasons you may want to trade this contract:

  • Hedging: You can use this contract to hedge risk in the market the same way institutional investors do with bigger contracts.
  • Speculation: You can speculate on the price of the Russell index and profit from the price fluctuations using this contract. Since you are using leverage, you can make a substantial amount of profits than trading individual components of the index.
  • Diversification: You can use it to diversify your investment portfolio away from equities.

What is the contract size?

One contract unit of the Micro E-mini Russell futures is equivalent to $5 x the current value of the index. The USD worth of the contract can be gotten by multiplying the values. Thus, given the current quote of $1770.60, as of writing, the USD worth of one contract unit of the Micro E-mini Russell futures (M2K) would be $5 x $1770.69 = $ 8,853.45.

What is the tick size?

The tick size of one contract of the Micro E-mini Russell Index futures is $0.50 for outright trading on the Globex platform. For calendar spread, the tick size is $0.25 per contract.

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

The minimum price fluctuation of the index is 0.10 index points for outright trading on the Globex platform. For calendar spread, the minimum price fluctuation is 0.05 index points.

Are there any ETFs?

Yes, many ETFs follow the Dow futures market. These are some of them:

  • VTWO-Vanguard Russell 2000 ETF (VTWO)
  • iShares Russell 2000 ETF (IWM)
  • Direxion Daily Small Cap Bull 3X Shares (TNA)
  • ProShares UltraPro Short Russell2000 (SRTY)

What factors affect Micro E-mini Russell prices?

The factors that affect the micro E-mini Russell futures include:

  • Interest rate changes
  • Macroeconomic reports such as CPI, GDP growth rate, interest rate, and so on
  • Sociopolitical events like elections
  • The state of the economy

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

Based on the TradingView chart for the micro E-mini Russell futures, the all-time high of this contract is 2,460.7, which it reached on Monday, November 8, 2021.

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

The biggest risk associated with trading the micro E-mini futures is price volatility that can result from the components’ stock price change. Being a leveraged product, the losses are calculated using the face value of the contract rather than the margin used. So, if you trade this contract with a 20x leverage, you could risk losing your capital if the index price declines by 5%.

What is the settlement method?

Financially settled.

What is the settlement procedure?

The final settlement is calculated by taking the special quote of the index on the final settlement day of the index which is usually the third Friday of the contract expiry month.

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

There is no minimum block threshold for this contract.

What is the difference between Micro E-mini Russell futures and the CFD for Micro E-mini Russell?

The micro E-mini Russell futures contract has fixed expiration dates whereas its CFDs can be traded continuously without much concern for contract expiration.

Which forex pair is the same as Micro E-mini Russell futures

Micro E-mini Russell CFD

What are some important dates for this market?

  • 1984 when the index was launched.
  • 1993 when the Russell 2000 index futures were introduced
  • 2017 when the E-mini contract debuted on the CME platform
  • 2019 when the micro contract was launched
  • November 2021 when it reached historical highs.

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

Based on the TradingView chart for the micro E-mini Russell futures, the highest level this contract has ever traded was 2,460.7, which it reached on Monday, November 8, 2021.

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

Based on the TradingView chart for the micro E-mini Russell futures, the lowest level this contract has ever traded was 949.1, which happened in March 2020.

Conclusion

As a retail trader with a small account, you can use the micro E-mini Russell futures to hedge your risk exposures in the US stock market, diversify your portfolio away from equities, or simply speculate on the future direction of the Russell 2000 Index.

Similar Posts