What is the Russell 2000 Index?

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, which is an index of the 3,000 largest stocks in the U.S. stock market. It is a market-capitalization-weighted index.

Although the Russell 2000 Index consists of two-third of the stocks in the Russell 3000 Index, it accounts for only about 8 percent of the total market capitalization of the Russell 3000 Index. The Russell 2000 Index is widely considered a better representation of small-cap U.S. stocks than the S&P 600 Index and is, by far, the most common benchmark for small-cap mutual funds. Many investors even see it as an indicator of the U.S. economy since it tracks the performance of smaller businesses.

The index was created in 1984 by the Frank Russell Company, but it’s now maintained by FTSE Russell, which is a subsidiary of the London Stock Exchange Group.

What are E-mini Russell 2000 Index futures?

Futures are financial contracts that obligate the buyer to purchase, and the seller to sell, the underlying asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. They trade on futures exchanges and are standardized.

The E-mini Russell 2000 Index futures are electronically traded equity index futures in which the underlying asset is the Russel 2000 Index. They are financially settled and are a fraction of the standard contract.

Futures are leveraged instruments, which means a trader only needs to deposit a portion of the total worth of the contract to be able to trade the contract. The minimum amount a trader needs to deposit to be able to trade the contract is known as the margin.

The contract is marked to market, which implies that at the end of every trading day, the clearinghouse of the exchange credit/debit the traders’ accounts with the profits or losses made on that day. Traders whose accounts are falling below the maintenance margin are required to top up their accounts to be able to keep their contracts.

Why trade E-mini Russell 2000 Index futures

There are many reasons traders trade the E-mini Russell 2000 Index futures, and these are some of them:

Speculation: Most of the traders in the futures market are there for speculative reasons, and the E-mini Russell 2000 Index futures have enough liquidity and volatility that interest speculators.

Portfolio diversification: Investors like to spread their capital across many stocks to reduce their risk exposure. The E-mini Russell 2000 Index futures represent an already diversified stock derivative product.

Hedging: Investors can use the E-mini Russell 2000 Index futures to hedge their exposure in the U.S. stock market since it tracks up to 2,000 stocks.

How the E-mini Russell 2000 Index futures trade

The E-mini Russell 2000 Index futures were trading on the Intercontinental Exchange until 2017 when it was moved back to the Chicago Mercantile Exchange (CME) Group to trade exclusively on the CME Globex electronic trading platforms.

The market is open Sunday to Friday, from 6:00 p.m. to 5:00 p.m. Eastern Time (ET) the next day, except on Fridays when the market closes by 5:00 p.m. ET to reopen by 6:00 p.m. on Sunday. BTIC trading is available Sunday to Friday from 6:00 p.m. to 4:00 p.m. ET the next day.

A contract unit of E-mini Russell 2000 Index futures (RTY) is equivalent to $50 times the current value of the Russell 2000 Index. The minimum price fluctuation is as follows:

• Outright: 0.10 index points, which is equal to $5.00 per contract
• Calendar Spread: 0.05 index points or $2.50 per contract
• BTIC (with the code RLT): 0.05 index points or $2.50 per contract

There are contracts listed for five months in the March Quarterly Cycle (March, June, September, and December). The maintenance margin requirement is $3,200, which is less than 4 percent of the total worth of the contract.

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. For the BTIC, trading terminates on the Thursday preceding the third Friday of the contract month at 4:00 p.m. ET.

If you wish to trade the E-mini Russell 2000 Index futures, all you need is to create an account with the exchange through a futures broker and deposit the required margin. Be cautious about futures trading though — while you can easily make money, you can also lose more than you invested.

E-mini Russell 2000 Trading Strategies

The E-mini Russell futures market is a market with high liquidity and a lot of price patterns to discover that you may use for your trading. Therefore it’s a market that’s well suited for trading strategies ranging from daytrading to longer-term position trading systems.

We trade a couple of trading strategies on this market and have found that you really can find some strategies that rely on specific market behavior that may not exist in the SP500 futures contract, just to name one example. This is also why we advocate looking for strategies on this market as well, and not limit yourself to the S&P500 only!

If you’re interested in getting edges for a variety of different futures and ETF markets, we really recommend that you have a look at our edge membership. 

The factors that affect E-mini Russell 2000 Index futures

There are many factors that can affect the E-mini Russell 2000 Index futures, and these are some of them:

Movement of the component stocks: The Russell 2000 is a market-capitalization-weighted index, so the movement of higher-cap stocks tends to affect the index more.

Trade policies: News of changes in trade policies make stock prices more volatile, which reflects on the price of the index futures.

Political events: Geopolitical events, such as wars, elections, and referendums, can have huge effects on stock prices and the value of the Russell 2000 Index.

Interest rate changes: Changes in the interest rates can affect stock prices and move the Russell 2000 Index.

Value of the U.S. dollars: When the USD is falling, the value of the index is likely to rise, and when the USD is rising, the index is likely to decline.

Conclusion

The E-mini Russell 2000 Index futures offer investors and fund managers a way to diversify their portfolio, as well as hedge their exposure in the U.S. stock market. Traders also use it to speculate on the direction of the Russell 2000 Index. The contract trades exclusively on the CME’s Globex electronic trading platform.

Here is our archive with articles about other tradeable futures markets.

FAQ

What are E-mini Russell 2000 Index futures?

E-mini Russell 2000 Index futures are electronically traded equity index futures, representing a fraction of the standard contract. Traders can speculate on its value, diversify portfolios, and hedge exposure to the U.S. stock market.

How are E-mini Russell 2000 Index futures settled?

Initially traded on the Intercontinental Exchange, they moved to the Chicago Mercantile Exchange (CME) in 2017. The market is open Sunday to Friday, and the contract is financially settled. 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. Maintenance margin requirement is $3,200.

How can I start trading E-mini Russell 2000 Index futures?

To trade, create an account with the exchange through a futures broker and deposit the required margin. Caution is advised, as with any futures trading, due to the potential for gains and losses. A contract unit is equivalent to $50 times the current value of the Russell 2000 Index. The minimum price fluctuation is 0.10 index points for outright contracts, equal to $5.00 per contract.