One of the most actively-traded equity index options on futures, E-mini S&P 500 options offer deep liquidity and round-the-clock market access for speculators of the S&P 500 index.
Traders utilize E-mini S&P 500 options for numerous trading strategies from basic to complex. These cash-based futures options offer distinct flexibility and versatility, providing a variety of trading opportunities including hedging and spreading strategies as well as outright positions.
S&P 500 Index
E-mini S&P 500 futures and options are both based on the underlying Standard & Poor’s 500 stock index. The S&P 500 index measures the stock performance of the 500 leading large-capitalization companies listed on U.S. stock exchanges.
Considered a barometer of large-cap U.S. equities and the U.S. stock market as a whole, the S&P 500 is closely followed by traders all over the world. As of June 2019, the market cap for the S&P 500 index was $25.6 trillion U.S. dollars.
Diversify with E-mini S&P 500 Options on Futures
E-mini S&P options provide traders multiple opportunities to manage risk and diversify their portfolios.
Hedge an existing position: E-mini S&P 500 (ES) futures traders can purchase calls or puts to manage risk if the market moves against them.
Diversify risk by trading in uncorellated markets: For example, a trader of agriculturals such as corn, wheat or soy can diversify with E-mini S&P options which will move differently
Speculate the S&P 500 with less exposure: E-mini S&P options give traders the opportunity to participate in the benchmark index by only risking the amount paid, or option premium, as well as commissions.
4 Unique Ways to Trade
E-mini S&P options on futures present 4 different ways to trade the S&P 500 index. Two types of options are available, call options and put options, and both can be traded on either the long or short side of the market.
Buy call options: Similar to putting a down payment towards a purchase, buying calls grants the owner the right to buy E-mini S&P 500 futures at a specified price before the option expires.
Sell call options: When selling call options, you sell the right but not obligation to buy the underlying E-mini S&P 500 futures market at a set price before a specified date.
Buy put options: Comparable to buying an insurance policy to protect your assets, buying put options grants owners the right to sell the E-mini S&P 500 futures market at an agreed price before the option’s expiration date.
Sell put options: Put sellers anticipate a rise in the value of ES futures and sell put options in exchange for the options premium.
Unlike options on stocks, options on futures expire into a long or short futures contract if the call or put expires in the money (ITM).
Please note: Although trading S&P 500 options on futures can be a way to diversify, speculative trading of options is inherently risky and traders should always practice appropriate risk-mitigation techniques. This applies to both buying and shorting call and put options. Traders should be aware of the costs involved in options trading including commissions and premium. Shorting options on futures, specifically selling calls, is considerably riskier than purchasing options and can result in substantial and potentially unlimited losses. Additionally, depending on the strike price, an option can expire worthless. For a detailed explanation of the risks involved, please reach out to a licensed options on futures broker.
Option Chain Available on NinjaTrader
Options on futures trading through the NinjaTrader platform is now available! The new Option Chain window provides an intuitive matrix to quickly manage expirations & quotes to trade options on futures.
See NinjaTrader’s Option Chain in action in this short video:
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