S&P 500

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S&P 500 Futures are almost 40!

January 24th, 2020 Filed under Commodity Trading, Future Trading News, S&P 500 | Comment (0)

SP 500 FuturesDon’t look now, the S&P Futures market is almost 40 years old! Prepare the over the hill jokes. On April 20th 1982, following winning a lawsuit to prevent the opening, regulators at the CFTC and SEC agreed to allow the contract, with the condition that it be settled using cash instead of delivering stocks. This was a revolution to the Commodity Sector, which was founded on delivering physical commodities like Live Cattle, Soy Beans and Silver. The move was expected to begin the merge between the equity and commodity sectors.

On April 21st 1982 at the CME “The Spoos” began trading futures based off the S&P 500 stock market index. Using 500 broad ranged stocks, S&P 500 Futures has since become the gauge for the economy. According to the April 22nd edition of the New York Times, “Indeed, the first trade was executed by a prominent gold trader, Maury A. Kravitz, who said he bought a contract for a client with a substantial stock portfolio. The seller was another floor trader, George I. Segal, who normally trades frozen pork bellies futures. Mr. Segal also said he was trading for a client with a large stock holding.” In the same year Paul Volcker and the Federal Reserve increased interest rates to nearly 20% successfully curbing inflation that kept the market suppressed since the late 1960s highs. The opening price was 116.35 and traded at $500 a point with a 1.5-point range. There were almost 4,000 contracts traded the first day. The notional value was about $58,500 and $3,200 margin.

In September 1997 S&P 500 Futures got its license to drive; opening on the online trading roads called GLOBEX. S&P Futures split in half making it $250 a point (moving to tenths from twentieths) while creating the E-mini (ES) 1/5 size contracts. The E-mini is traded exclusively on GLOBEX in quarter point increments allowing for the first time -traders to place their own trades instead of having to call it down to the floor. In 1998 the market closed over $1,000 for the first time. The volume was about 100,000 per day and the Notional value was $250,000 for the full size and $50,000 ES. The margin was about $5,000 per contract for the ES.

In May 2019 the ES E-mini S&P Futures at 37 years old had offspring of its own when the CME launched Micro Futures on the ES. The Micro ES, symbol MES, is 1/10 the size of the ES and 1/50 the size of the full size and 1/100 of the original contract. The original S&P Futures have all been but phased out with the closing of the physical pit a few years ago. The E-mini (ES)- now becoming known as the new “standard-size” S&P, is trading over price 3,300 making a nominal value of $165,000 per contract. This is 3x the size of the original futures contract’s nominal value while using the contract that was 1/10 of the size, using the $500 per point vs the $50 per point. Comparing apples to apples; the nominal value would have grown from $58,500 to $1,650,000 per contract. The volume is typically between 1 million and 2 million contracts traded per day and the margin is currently $7,290 for the ES contract, with many Brokers offering $500 day margins. If the cycle continues, the MES Micro ES futures will grow in size and who knows might become “standard- size” one day.

Celebrate the evolution by registering for a free Demo below to try the New Micro S&P Futures.

RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.

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