Ever since the emergence of stock index futures on the commodity exchanges, they have been the delight of futures traders because the contracts do not require physical delivery at expiration. As a result, different categories of stock index futures contracts are created to make the product accessible to all kinds of traders.

For the Nasdaq 100 Index futures, there are standard, e-mini, and micro e-mini contracts. The Micro E-mini Nasdaq futures are meant to cater to traders and investors with little capital, as the margin requirement is not even up to a thousand bucks.

Micro E-mini Nasdaq 100 Futures Contract Specifications
Symbol
MNQ
Exchange
CME
Tick Size
$0.5
Point Value
$2
Contract Size
$2 x Nasdaq 100
Contract Months
March, June, September & December
Trading Hours
Sun - Fri 6:00 pm – 5:00 pm ET
Settlement
Financially settled
Last Trading Day
Third Friday of the contract month.

 

What is the Nasdaq 100 Index?

The Nasdaq 100 Index is a stock market index that consists of the 100 largest, non-financial companies (both U.S. and non-U.S. companies) listed on the Nasdaq stock exchange. It includes large companies from the technology, biotech, healthcare, industrial, and retail sectors.

With more than half of the index’s weight, technology stocks make up the bulk of the index. Amazon, travel services, and other stocks from the retail sector make up about 25 percent of the weight, while biotech, healthcare, and industrial sector round-up the index.

The Nasdaq 100 Index was first calculated on January 31, 1985, by the NASDAQ and has been maintained by the exchange since then. It uses a modified market-capitalization weighting system in calculating the index. So, even though the component stocks are weighted according to their market cap, some distribution rules are in place to limit the influence of the largest companies, thereby balancing the index with all components.

What are Micro E-mini Nasdaq 100 futures?

What are Micro E-mini Nasdaq 100 futures?

What are Micro E-mini Nasdaq 100 futures?

Futures are tradable financial derivative contracts that require the trading parties to receive or deliver the specified value of the underlying index on a future date, at an already agreed price. The Micro E-mini Nasdaq 100 futures are a type of electronically traded Nasdaq 100 futures whose value is one-tenth of the E-mini Nasdaq 100 futures. Just like the e-mini and the standard contracts, the underlying asset is the Nasdaq 100 Index.

In May 2019, the Chicago Mercantile Exchange Group launched the Micro E-mini Nasdaq 100 futures — together with other equity index micro futures — on its Globex electronic platform to help less-capitalized retail traders gain exposure to the Nasdaq 100 futures at a much lower cost than the already existing e-mini contracts. As with the e-mini version, the contracts are financially settled.

Micro futures are still leveraged instruments, so a trader only needs to deposit a portion of the total worth of the contract, known as the margin, to be able to trade the contract. The margin may vary depending on the contract expiration.

Trading outcomes are marked to market — at the end of every trading day, the clearinghouse of the exchange credit/debit each trader’s account with the profit or loss made on that day. Traders whose accounts are falling below the required margin are required to deposit more money to be able to keep their trade.

Why trade Micro E-mini Nasdaq 100 futures?

Why trade Micro E-mini Nasdaq 100 futures?

Why trade Micro E-mini Nasdaq 100 futures?

These are some of the reasons traders play the Micro E-mini Nasdaq 100 futures:

Hedging: Retail investors may use the Micro E-mini Nasdaq 100 futures to hedge their exposure in tech stocks.

Speculation: Many traders in the futures market, especially the less-capitalized ones, are speculators.

Portfolio diversification: The Micro E-mini Nasdaq 100 futures provide a cheaper way to invest in a diversified portfolio of tech stocks without owning the individual company stocks.

The benefits of Micro E-mini Nasdaq 100 contract over the Mini contract

The Micro E-mini Nasdaq 100 contracts have the following benefits over the mini and standard contracts:

Capital efficiency: Compared to the $7,500 required for the E-mini Nasdaq 100 futures contract, only a $750 maintenance margin is required to carry the micro e-mini contract. Also, the tick value for the micro contract is a fraction of the mini version.

Ease of diversification: With the micro contracts being less capital intensive, traders can afford to trade other assets at the same time.

Emotional control: A trader’s emotional control is normally dependent on the amount at risk. The lower margins and tick size for the micro contracts make them easier to manage.

Micro E-mini Nasdaq 100 Trading Strategies

Nasdaq Daytrader

Nasdaq Daytrader

The Nasdaq Micro E-mini Futures market is perfect for those who want to trade strategies from the bigger E-mini contract, with a limited account size. The market is fairly liquid, although it doesn’t beat the liquidity of the bigger E-mini contract.

Some of the types of trading strategies that usually work well in the equity index markets, are mean reversion strategies and breakout strategies. Of these two, the mean reversion systems tend to be those that are the easiest to find and build.

If you want to learn how to build your own trading strategies, we recommend that you look closer at our definitive guide to building a trading strategy.

For those of you who would like to get your hands on various types of edges, we offer a unique edge membership where you as a member get access to new edges every month! Have a look!

How does the Micro E-mini Nasdaq 100 futures trade?

The Micro E-mini Nasdaq 100 futures are offered exclusively on the Chicago Mercantile Exchange (CME) Group’s Globex electronic trading platform. Trading is open Sunday to Friday from 6:00 p.m. to 5:00 p.m ET the next day.

A contract of Nasdaq 100 futures (MNQ) is equivalent to $2 times the current value of the Nasdaq 100 Index. The minimum price fluctuation is as follows:

  • Outright: 0.25 index point or $0.50 per contract
  • Calendar Spread: 0.05 index points or $0.10 per contract

There are quarterly contracts (March, June, September, and December) listed for five consecutive quarters. The margin required to maintain one contract of the Micro E-mini Nasdaq 100 futures is just $750.

At expiration, the contract is settled with cash. The last trading day is the third Friday of the contract month, and trading terminates at 9:30 a.m. ET.

How to start trading E-mini Nasdaq 100 futures

If you are interested in trading this contract, you will have to open an account with the exchange through a futures broker and deposit the required margin. Be cautious about futures trading though — it may appear easy to make money from futures trading, but you can also lose all invested.

The factors that affect Micro E-mini Nasdaq 100 futures

Here are some of the factors that can affect the Micro E-mini Nasdaq 100 futures:

Trade policy changes: Any change in trade policy can affect stock prices and influence the value of the index futures.

Political events: Events like elections, referendums, wars, and other geopolitical events affect stock prices and the value of the index.

Changes in interest rates: The stock market usually responds to changes in interest rates, and the Nasdaq Index is not an exception.

Conclusion

The Micro E-mini Nasdaq 100 futures offer small investors a means to diversify their portfolio, as well as hedge their exposure in technology stocks. It also provides retail traders with an opportunity to speculate on the direction of the Nasdaq 100 Index. The contract is traded exclusively on the CME’s Globex electronic trading platform.

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