What Are They?

I. CME E-Mini Stock Index Futures: Section 1 of 4

E-mini S&P 500 and E-mini Nasdaq-100 stock index futures are electronically traded, smaller versions of the stock index futures contracts used by the big financial institutions. (The "E" stands for electronic, and the "mini" refers to the smaller size of these investment tools.) At one-fifth the size of their institutional counterparts (also traded at CME), they can be easily used by individual investors. They provide a highly liquid way to trade stock indexes.

From a practical standpoint, they trade similarly to stocks. You can go long (buy) and then close out your trade by selling. It's also just as easy for an individual investor to sell short as it is to buy an E-mini stock index contract - an advantage over trading stocks. As futures contracts on stock indexes, these E-minis trade at a price that is closely related to the underlying stock market index on a day-to-day basis. Like other futures, these products are a type of forward contract. This means they are agreements to buy or sell their underlying product at a specific price on a specific date in the future.

When you trade these products, you are trading on the future direction of the underlying stock indexes. E-mini stock index prices fluctuate as the stock markets move - almost constantly. As a result, these contracts offer virtually endless trading opportunities. Similar to the stock market, you execute these trades via a registered broker over the phone or with electronic order management software on your PC.