Contract (“notional”) value and tick size
A futures contract's value is typically its contract size multiplied by the current price. For example, if gold futures are trading at $1,900 an ounce, one futures contract representing 100 troy ounces would be valued at $190,000 ($1,900 x 100 = $190,000).
This will ultimately determine how much money you will need to have in your account for each contract you trade. The range varies from as little as $500 to $5,000 USD per contract for the mini products. But if you are brand new, you can start trading micro futures for as little as $50 to $400 per contract.
Pricing of a futures contract depends on the characteristics of the underlying asset. There is no single way to price futures contracts because different assets have different demand and supply patterns, different characteristics and cash flow patterns. Market participants use different models for pricing futures.
Micro E-mini futures contract specifications. S&P 500 futures: 0.25, worth $1.25 per contract. NASDAQ-100 futures: 0.25, worth $0.50 per contract. Dow Jones futures: 1.00, worth $0.50 per contract.
Trade Micro E-mini Index Futures For Increased Flexibility and Reduced Costs. At 1/10th the size of the standard contract, Micro E-mini futures contracts allow traders like you to more easily access the highly liquid equity index futures markets with reduced costs and margins as low as $50.
How much does it cost to trade futures? Fees for futures and futures options are $2.251 per contract, plus exchange and regulatory fees, and you pay the same commission whether you trade online or with the help of a broker. Note: Exchange fees may vary by exchange and by product.
A price limit is the maximum range that a futures contract is allowed to move up or down within a single day. Price limits are re-calculated every day. When price limits are reached in one day, the variable price limits might be implemented to expand the initial limits to the variable amount for the next trading day.
Minimum Account Size
A pattern day trader who executes four or more round turns in a single security within a week is required to maintain a minimum equity of $25,000 in their brokerage account. But a futures trader is not required to meet this minimum account size.
The takeaway
Trading futures for a living is a compelling idea — but to do it successfully, you'll need sufficient startup capital and a well-designed trading plan. You'll also need a trading platform that offers fast, reliable access and the right technological tools.
One of the key benefits of futures trading vs. stocks is leverage. When buying or shorting stocks, most only offer 25% day trading or 50% overnight margin. With futures, you can put up less than 5% to control a position that represents a major market index or commodity that allows for potentially greater profits.
The notional value of a futures contract is simply the spot price of the asset multiplied by the amount of the asset specified in the contract. The futures value is the current futures price multiplied by the contract size.
Perpetual futures, also known as perpetual swaps or “perpetuals,” are a type of derivative contract that allows traders to speculate on the future price of an asset without an expiration date. Unlike traditional futures contracts, which have a set expiry date, perpetual futures can be held indefinitely.
However, this makes options contracts significantly more expensive than futures. Most futures contracts only require you to stake some money in your brokerage account to prove that you can cover potential losses. Otherwise the actual price of the contract is little more than a minimal transaction cost.
Here's a quick look at the primary ones: Frequency: Futures traders aren't subject to FINRA's PDT rules. They are free to execute as many intrasession trades as they want. Solvency: Futures trades clear quickly.
The minimum tick is one-quarter of an index point, or $12.50 per contract. If /ES rises or falls, say 30 points (about 1%), that translates into a gain or loss of $1,500 (30 points/0.25 minimum tick = 120 ticks; 120 x $12.50 = $1,500).
The Micro gold futures are 1/10 the size of the 100-ounce Gold futures contract. So, the contract unit of the Micro Gold futures contract is 10 troy ounces. Like the 100-ounce Gold futures contract, Micro Gold futures are quoted in 10-cent increments, making a one-tick move in the Micro Gold futures equal to $1.
While futures can pose unique risks for investors, there are several benefits to futures over trading straight stocks. These advantages include greater leverage, lower trading costs, and longer trading hours.
If your goal is $100 a day, you'll need at least $1,000 in your account. For a $300 daily goal, you're looking at $3,000 to $5,000 to trade effectively.
The best lot size for $500 is nano lot or micro lot.
A nano lot (0.001 lots) is still the way to go as you can buy five nano lots if you want to use all your capital, but you can begin exploring micro lots (0.01 lots) if you're confident in your risk management and trading strategy.