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Trading Functionality: Micro E-mini Futures vs. ETFs and MES ETF Holdings

| September 7, 2021 | By

If you’ve ever spent the morning tuned into CNBC, then chances are you have heard of the S&P 500. However, you may have missed emerging economy products such as VanEck Vectors Gulf States Index ETF. Known as MES ETF holdings, the now delisted fund is a good example of how savvy investors secure exposure to international markets.

In this article, we’ll take a look at emerging economy ETFs, CME Micro E-mini futures, and a few other products that offer unique diversification opportunities.

CME Micro E-mini Futures vs. Exchange-Traded Funds

Active traders have many ways to engage the world’s equities markets. Among the most popular are exchange-traded funds (ETFs) and futures. As of May 2019, CME Micro E-mini futures became the latest equities futures product to enter the fray.

The Functionality of ETFs

An exchange-traded fund (ETF) is a basket of investments that are combined into a single, tradable product. ETFs have gained a massive following in recent years, boasting an aggregate value of $5 trillion globally. Among the most popular ETFs are those that track the big four U.S. equities indices. But for traders and investors looking for extraordinary returns, emerging market (EM) listings are often more attractive.

Without question, the U.S. stock market and S&P 500 index are premier benchmarks for global economic performance. Nonetheless, EM offerings such as MES ETF holdings have the potential to outperform a conventional DOW futures ETF. To illustrate this point, examine the difference between a U.S. index futures based ETF and comparable EM listings for COVID-dominated 2020:

ETF % Gain/Loss
Direxion Daily S&P 500 Bull 3X (SPXL) +9.73%
ProShares UltraPro S&P 500 (UPRO) +10.21%
iShares MSCI China ETF (MCHI) +28.69%
iShares MSCI Brazil ETF (EWZ) -19.78%

As you can see, the returns on EM ETFs vary wildly, as does the risk profile. In contrast, the UPRO vs. SPXL matchup was largely a push, with each showing stability amid vast COVID-19 uncertainty.

Aside from conventional U.S. equities and EM ETFs, other, more exotic offerings are also gaining notoriety. For instance, an “e ETF” provides traders with exposure to strictly the e-commerce sector.

Boutique listings like the e ETF offer traders and investors many diversification options. So, if you’re trying to figure out the SPXL vs. UPRO vs. e ETF quandary, relax. There’s an ideal product—or even multiple ideal products—for anyone’s market-oriented objectives.

Benefits of CME Micro E-mini Futures

Contrary to the delisted MES ETF holdings, CME equities index futures have a massive following. And, since their launch, the popularity of CME Micro E-mini futures has grown immensely.

Here are the Micro E-mini futures equities indices products available at the CME:

Index Base E-mini Contract Symbol Tick Size
S&P 500 E-mini S&P 500 (ES) MES $1.25
DJIA E-mini DOW (YM) MYM $0.50
NASDAQ-100 E-mini NASDAQ (NQ) MNQ $0.50
Russell 2000 E-mini Russell (RTY) M2K $0.50

Perhaps the largest advantage to trading Micro E-mini futures is the vastly reduced tick size. For instance, the Micro E-mini S&P 500 is valued at $1.25 per tick, in comparison to the regular ES size of $12.50. Strategically, the reduced margins free up the trader to hold an open position for an extended period, regardless of drawdown or overnight margin considerations.

Getting Started with the Micro E-minis

For more information on how the CME’s new Micro E-mini equities products can benefit you, contact a broker at StoneX today. Whether you’re a market newbie or a seasoned vet, StoneX can help make futures a valued part of your portfolio.

Depending on available resources and trade-related objectives, either ETFs or futures may be best suited for your situation. For most active retail traders, Micro E-mini futures offer several advantages over ETFs:

  • Flexibility: In futures trading, you’re able to easily take long or short positions in a given market, making it possible to profit from rising or falling asset prices. Although it’s technically possible to do likewise in ETFs, limitations exist in the form of extensive margin requirements and trading restrictions.
  • Low commissions: Futures feature a relatively low per-round-turn commission and fee structure. ETF commissions vary but can be as much as $20 per trade.
  • No management fees: ETFs qualify as managed funds, so a fee is required to participate. On average, fees run in the neighborhood of 0.44 percent annually on deposit.
  • Business hours: Futures are traded electronically on a near-24/5 basis. ETFs, specifically those based upon equities, are typically limited to the exchange’s business hours.

Future/ETF Hybrid Products

In addition to conventional futures and ETFs, a unique lineup of hybrid products is getting the attention of traders around the globe. These instruments combine the derivative nature of futures and options contracts with the tradability of ETFs. Two noteworthy products are ETF futures and micro options:

  • ETF Futures: Future ETF products are exchange-traded funds that are based on futures contracts. Known as geared ETFs, these securities are designed to give traders leveraged exposure to specific markets. Examples of these issues are the ProShares Leveraged China ETF (XPP) and Direxion Daily S&P 500 Bull 3X (SPXL).
  • Micro Options: Micro options trading is the buying and selling of reduced-sized contracts. Known as “mini options” for stocks and ETFs, these products are ideal for smaller retail traders. Futures micro options facing the CME Micro E-minis are available.

Ultimately, the success of any product hinges on public interest and traded volumes. For ETF futures and options, the same factors apply. If new listings don’t generate significant trading volumes, they are delisted in the same fashion as MES ETF holdings.

This blog was originally published on May 9th, 2019, and has been updated for accuracy and comprehensiveness.

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