Fine-Tune Your Risk: Tap into the Precision of a Smaller-Sized Contract

Fine-Tune Your Risk: Tap into the Precision of a Smaller-Sized Contract

By Mark O’Brien, Senior Broker

At a fraction of one full-sized contract, Mini and Micro futures provide flexible leverage as an alternative to large contracts. Among the available fractional futures contracts, by far the most well-known and most liquid are the E-mini stock index futures: E-mini S&P 500, E-mini Nasdaq, E-mini Russell 2000 and Mini Dow Jones. With the introduction back in May ’19 of the Micro E-mini futures, there are fractional versions of the E-minis.

But stock index futures are not the only ones with fractional contracts. Almost every commodity sector offers futures contracts that are fractional versions of their classic full-sized contracts. They all offer opportunities to trade markets with more precise leverage and reduced margins.

In the energy sector, there are E-mini natural gas futures contracts at 1/4 the size of full-sized contract (1 million British Thermal Units). A one-cent move for the E-mini natural gas futures contract is equal to $25.

In crude oil, whose full-sized, 1,000 barrel contract is the largest energy futures contract in the world by volume, there are both E-mini crude oil (1/2 the size) and Micro crude oil (1/10 the size).

Mini contracts are offered in corn, wheat and soybeans. All are 1/5 the size, so a 1-cent move in each contract is equal to $10.00 compared to a 1-cent move/$50 for their mighty forerunners.

In metals, the renowned COMEX 100-ounce gold futures contract can be traded fractionally with a 50-ounce Mini gold and a 10-ounce Micro gold.

Both silver and copper offer Mini contracts that are 1/2 the leverage of their respective 5,000-ounce and 25,000-pound full-sized relatives.

There are Micro futures contracts with 1/10 the leverage of their full-sized bellwether currency futures for all of those listed below:

Euro FX

Swiss Franc

British Pound

Japanese Yen

Canadian Dollar

Australian Dollar

A word of caution: many of these contracts’ liquidity is concentrated in their respective front months – often right up to their Last Trading Day. Take care to check a contract’s volume/open interest before trading.

Contact your Cannon Trading broker for additional information on any of these futures contracts, including price quotation, trading hours, minimum price fluctuation, symbol code, settlement method (cash or physical), risk considerations, etc.

Even if you are not a client yet, you can still contact us and we are happy to help.