What Are CME Event-Based Contracts? | StoneX

Since its inception, the Chicago Mercantile Exchange (CME) has been an innovator in the trade of financial derivatives. From its lineup of E-mini equities to cryptocurrency futures, the CME provides active traders with a wide variety of alternatives.

Read on to learn more about the new event-based contracts and how they may help you achieve your financial goals.

What Are CME Event-Based Contracts?

Event-based futures are the newest derivatives products offered by the CME. Scheduled for launch in Q3 2022, event-based contracts give traders a small-scale way of trading bullish or bearish market biases.

According to the CME, event-based contracts are “an easier way for individuals to trade their views on daily up or down price moves in some of the most widely quoted benchmark futures markets.” Here’s how CME Group Chairman and CEO Terry Duffy describes event-based contracts:

“Retail investors have become increasingly savvy about their investment decisions. Our new event-based contracts will provide this dynamic retail investing crowd a simpler, lower-cost way to participate in some of the world’s most recognized markets.”

So how do event-based contracts work? Essentially, these products are options on futures contracts that focus on daily price movements of an underlying market. They provide traders with a way to express opinions on daily price action. Event-based futures have the following characteristics:

• Enhanced granularity: Each event-based contract is designed to provide traders with limited market exposure. Values are small, beginning at $20 per contract.
• Compressed time horizon: Event-based contacts are designed for intraday time frames. Given this structure, you can buy or sell based on where you think a market will close for the day. If Trader A believes WTI crude oil will trade positively, the WTI event-based contract streamlines the trading process.
• Collateralized: All contracts are fully collateralized, so live market positions are backed by real assets.
• Defined risk to reward: At the time of the trade, participants are able to define risk and reward. This feature lets traders engage any market, no matter how volatile the conditions may be.

At their core, event-based contracts offer a low-risk way of trading price action. Starting at just $20, any retail trader can play an opinion on how the world’s leading markets are priced on a daily basis.

Key Markets

CME event-based contracts face the most popular futures markets in the world. Asset classes include equities, energies, metals, and currencies:

• Equities: The leading equities indices act as the basis for many event-based contracts. From the large-caps of the E-mini S&P 500 and E-mini DOW to the growth stocks of the E-mini NASDAQ 100 and E-mini Russell 2000, event-based equities have the U.S. stock markets covered.
• Energies: The complexities of the world’s energy markets foster volatility and attract traders from all corners of the globe. Event-based contracts will service energy traders of all kinds via West Texas Intermediate (WTI) crude oil and Henry Hub natural gas contracts.
• Metals: Whether you’re a gold bug or a silver aficionado, event-based metals have something for you. Offerings include gold, silver, and copper.
• Currencies: For active forex traders, the EUR/USD currency pair has its own event-based contract. It is represented as the USD/EUR, similar to Euro FX futures.

CME event-based products have something for everyone. No matter if you’re a crude oil or stock trader, these contracts offer a way to trade short-term market perspectives with limited risk exposure.

Want to Learn More About CME Event-Based Contracts?

As mentioned earlier, the launch of CME event-based contracts is scheduled for Q3 2022. For more information on how to get involved with these exciting products, reach out to the team at StoneX.

Featuring decades in the market, our financial professionals can help you take advantage of event-based contracts and much, much more. Before you place another trade, be sure to contact us today!