No, we’re not talking Chinese here. We’re talking about the NASDAQ 100 e-minis, also called noodles. E-minis were introduced with the rise of electronic trading and are now traded on the NASDAQ 100, S&P 500, Dow Jones, bond, currency and other markets. In our Futures Trading Secrets course, we recommend that our students trade the e-minis. Why?
- E-minis closely follow the price movement of their underlying index, allowing participation in the market on a broad basis and diminishing the risk.
- E-minis trade electronically making them easily accessible to any trader with computer access.
- E-minis trade around the clock, except for a 30-minute break from 4:15 to 4:45 p.m. EST, accentuating worldwide trading.
- E-mini contracts are smaller in size, representing one-fifth of the underlying full contract on any market. The smaller scale and lower margins make trading on the e-minis accessible to individual traders.
- Smaller contracts equal smaller tick values which allow small-scale traders to participate on the e-minis without a huge capital outlay.
- Small contracts also equal smaller risk for individual and small-scale traders.
- E-minis provide tremendous leverage due to the small initial margin requirements.
- E-minis are extremely liquid and improve the liquidity of the market.
- With no down-tick rule as in stock trading, e-minis are as easy to sell short as long.
- Electronic trading is practically instantaneous and easy to execute through the GLOBEX system.
- You can get a tax break when you trade e-minis. Only 40% of gains are taxed at normal income tax rates; the other 60% are taxed at long-term capital gains rates.
Trading volume on the e-minis has steadily increased since their introduction in 1997. On September 9, 1997, the first day the S&P 500 e-mini (called the ES) traded, 7494 contracts were traded. By July 24, 2002, that volume had jumped to a single-day record of 975,985 contracts traded. The noodle (NASDAQ 100, also called the NQ) opened for trading on June 21, 1999 with 2136 contracts traded. On July 24, 2002, 376,120 contracts were traded.