The Micro E-mini Russell 2000 Index futures makes it possible for market participants with small trading capital to trade the Russell 2000 Index futures. With its less capital requirement, almost any trader who wishes to play the U.S. small-cap stocks can participate in the market.

Being an equity index futures, the contract is financially settled. So, it is an efficient and cost-effective way for retail investors to gain market exposure to U.S. stocks without actually owning the individual company stocks.

Russel 2000 Micro E-mini Futures Contract Specifications
Symbol
M2K
Exchange
CME
Tick Size
$0.2
Point Value
$2
Contract Size
$2 x Micro E-mini Russel 2000
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 Russell 2000 Index?

Created in 1984 by the Frank Russell Company, the Russell 2000 Index is a U.S. stock market index that tracks the performance of the bottom 2,000 stocks in the Russell 3000 Index. The Russell 3000 Index, itself, is an index that measures the performance of the 3,000 largest stocks in the US, which represents close to 98 percent of the U.S. stock market.

The Russell 2000 Index is a market-cap-weighted index maintained by FTSE Russell, which is a subsidiary of the London Stock Exchange Group. It is widely considered a better representation of small-cap U.S. stocks than the S&P 600 Index, so it is usually seen as the benchmark for small-cap mutual funds.

As a matter of fact, many investors even use it as an indicator of the U.S. economy since it tracks the performance of smaller businesses.

What is Micro E-mini Russell 2000 Index futures?

Futures are financial derivative contracts that require the engaging 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 Russell 2000 Index futures are a type of electronically traded Russell 2000 Index futures whose value is one-tenth of the E-mini Russell 2000 Index futures, and the underlying asset is the Russell 2000 Index.

It was launched on the Chicago Mercantile Exchange Globex platform in May 2019 to help retail traders gain exposure to the Russell 2000 Index futures at a much lower cost than the already existing e-mini futures contracts. As with the e-mini version, the contracts are financially settled.

Since futures are leveraged instruments, 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.

Futures are often 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. A trader whose account is falling below the required margin is asked to deposit more money to be able to keep their contract.

Why trade Micro E-mini Russell 2000 Index futures

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Why trade Micro E-mini Russell 2000 Index futures

These are some of the reasons for trading the Micro E-mini Russell 2000 Index futures:

Hedging: Retail investors can use the Micro E-mini Russell 2000 Index futures to hedge their exposure in the stock market.

Portfolio diversification: The Micro E-mini Russell 2000 Index futures provide a cheaper way to be invested in a diversified stock portfolio without owning the individual company stocks.

Speculation: Many small traders in the futures market are speculators, and the Micro E-mini Russell 2000 Index futures is a less-capital-intensive product for speculative trading.

The benefits of Micro E-mini Russell 2000 contract over the mini version

When compared to the E-mini contracts, the Micro E-mini Russell 2000 contracts have the following benefits:

Capital efficiency: The maintenance margin required for carrying the Micro E-mini Russell 2000 Index futures contract is $320 compared to the $3,200 required for the mini contract. The tick value for the micro contract is also a fraction of the mini version.

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

Emotional control: Emotional control is normally dependent on the amount at risk. Traders have better control of their emotions when dealing with lower margins and tick sizes.

How the Micro E-mini Russell 2000 Index futures trade

The Micro E-mini Russell 2000 Index 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.

One contract of Russell 2000 Index futures (M2K) settles for $5 times the current value of the Russell 2000 Index. The minimum price fluctuation is as follows:

  • Outright: 0.10 index point, which is equivalent to $0.50 per contract
  • Calendar Spread: 0.05 index points or $0.25 per contract

There are quarterly contracts (March, June, September, and December) listed for five consecutive quarters. 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. The margin required to maintain one contract of the Micro E-mini Russell 2000 Index futures is just $320.

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. But be cautious about futures trading — while you can easily make money, you can also lose it all.

E-mini Russell 2000 Index futures Trading Strategies

Trading Strategy

Trading Strategy

The equity index markets indeed are some of the most popular and easiest markets when it comes to building and finding strategies. This, of course, also apples to the micro e-mini futures contracts.

Some of the most popular trading forms that tend to work really well in most equity markets, are mean reversion and breakout trading. Of these two, the former tends to be the easiest, and also is what you should focus on in the beginning.

If you’re feeling like you cannot come up with new, fresh ideas for trading strategies that work on a variety of markets, we really recommend that you take a look at our edge membership. Members get new edges each month, which for many has proven to be an invaluable help in the strategy creation process!

Factors affecting Micro E-mini Russell 2000 Index futures

These are some of the factors that can affect the Micro E-mini Russell 2000 Index futures:

Movement of the component stocks: The Russell 2000 Index is a market-cap-weighted index, so component stocks with higher market capitalization have more effects on the index than the smaller-cap component stocks.

Trade policy changes: Any news of changes in trade policy do affect stock prices, and influence the price of the index futures.

Political events: Elections, referendums, wars, and other forms of geopolitical events affect stock prices and, in turn, move the index.

Changes in interest rates: The stock market usually responds to changes in the Federal Reserve’s interest rates, and the Russell 2000 Index is not an exception.

Value of the U.S. dollars: A falling USD may drive up stock prices, while a rising USD can lead to a decline in stock prices.

Conclusion

The Micro E-mini Russell 2000 Index futures make it easier for small investors to hedge their exposure in the U.S. stock market through the futures market. In addition, it offers retail traders the opportunity to speculate on the direction of the index. The contract is offered only on the CME’s Globex electronic trading platform.

 

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