Volatility can arise suddenly, destroying winning trades and shaking the markets to their core. Successfully navigating turbulent financial waters can be an epic challenge ― finding the ideal instrument to trade is a key part of excelling when the road becomes rocky.
During times of chaotic price action, the best trading vehicles are those that limit risk while preserving opportunity. The E-mini lineup of products offered by the Chicago Mercantile Exchange (CME) and participating futures brokers do just that, giving traders a means to deal with the unexpected.
Putting Volatility in Check With the E-minis
If you’re already in the market or looking to become involved, then the E-minis may be your avenue to prosperity during volatile periods. Listed primarily on the CME, E-mini futures are an electronically traded collection of products that offer diversity, flexibility, and limited risk exposure to active traders.
Diversity
No matter if you’re an equities, currencies, metals, or energies trader, the E-minis are suitable instruments that are both liquid and active. Here is a brief look at the CME’s popular catalogue of E-mini futures:
| Product | Symbol | Asset Class |
|---|---|---|
| E-mini S&P 500 | ES | Equities Index |
| E-mini NASDAQ 100 | NQ | Equities Index |
| E-mini DOW | YM | Equities Index |
| E-mini Russell 2000 | RT | Equities Index |
| E-mini WTI Crude Oil | QM | Energies |
| E-mini Natural Gas | QG | Energies |
| E-mini Gold | GC | Metals |
| E-mini Copper | QC | Metals |
| E-mini Euro FX | E7 | Currencies |
| E-mini Japanese Yen | J7 | Currencies |
These products are routinely available to clients across the gamut of futures brokers, from full-service to self-directed outlets.
Flexibility
One of the strongest benefits of E-minis is the flexibility they offer traders. Many types of strategies are feasible, from short-term scalping to multi-session swing trading. No matter the type of trader you are, the E-minis can fit into your plan for capitalizing on market volatility.
Conventional wisdom tells us that increased pricing volatility equals enhanced risk. The beauty of the E-minis is that wild price action may be readily tamed in any number of ways. Here are two of the most powerful:
- Safe-haven exposure: As many futures brokers will tell you, acquiring safe-haven assets is one way to avoid a financial catastrophe during times of extreme uncertainty. For example, E-mini gold offers traders the ability to go long on bullion via a cost-effective and financially settled investment vehicle.
- Active shorting: When the markets take a turn south, E-mini futures give opportunistic traders a chance to profit from selling high and buying low. In the event Wall Street hits the panic button, actively shorting the Dow Jones Industrial Average, NASDAQ, and S&P 500 may be easily accomplished.
Helter-skelter markets can make even the most seasoned investor shiver. Through the flexibility of E-mini futures, you don’t just have to weather the storm ― you can prosper.
Reduced Capital Exposure
The calling card of heightened volatility is wild, unpredictable fluctuations in asset pricing. Due to this primary characteristic, trading in such times is best accomplished by implementing limited leverage.
E-mini futures give traders the ability to engage the markets without assuming extraordinary financial commitments. Conversely, investing in traditional stocks and mutual funds frequently becomes capital intense endeavors. With the 50% margin requirements outlined by Regulation T of the Federal Reserve Board, open positions in stocks are often heavily vested.
On the other hand, E-mini equity products facing the DJIA, S&P 500, and NASDAQ give traders the ability to capitalize on the vastly reduced margin requirements offered by most futures brokers. This is important because you can put a smaller amount of money, rather than your entire portfolio, in harm’s way in an attempt to realize gains.
Make Sure Your Futures Brokers Offer the E-minis!
The E-minis are powerful products that open the door to a wide variety of asset classes. Reduced margins and a diversity of offerings promote flexibility seldom found in a single security. If you’re going to trade during times of market volatility, then the E-minis are definitely worth a look.
