What are E-mini Russell Index Futures?
E-mini Russell 2000 index futures are based on the Russell 2000 stock index and are a subset of the Russell 3000 index which tracks the 3,000 largest US traded stocks. Also known as the small-cap index, the Russell 2000 index is a popular measure of small stock performance and economic growth in the US.
The Russell 2000 index is a cap-weighted index, where stocks with higher capitalization values are weighted more heavily in calculating the price of the index.
The stocks that make up the Russell 2000 index futures include companies in emerging industries or niches that may be poised for significant growth. As a result, the Russell indexes have become some of the most quoted indexes in the world for small cap stocks. Additionally, stocks are added and removed from the index based on the changes in the market capitalization values of stocks.
Why Trade E-Mini Russell Index Futures?
E-mini Russell 2000 index futures (contract symbol = RTY) provide access to trading opportunities within an active and highly quoted stock index reflecting small cap stocks attractive to stock investors. Benefits of trading E-mini Russell index futures include the ability to:
Speculate on combined price of 2000 small cap companies
Hedge a portfolio of stocks against potential market declines
React quickly to trading opportunities hours before the US stock market opens
Trade both a standard and Micro-sized contract for maximum flexibility
Trade Micro E-Mini Russell 2000 Index Futures To Reduce Costs
At 1/10th the size of the standard E-mini contract, Micro E-mini futures allow traders to access the highly liquid equity index futures markets with reduced costs, and margins as low as $50. Other advantages of trading these bite-sized contracts include:
- Access to the most popular and liquid futures contracts
- Highly leveraged markets for more buying power*
- Start with a smaller account vs. the full-size E-mini contract
- Increased flexibility for better position management
Micro Russell E-mini futures contracts provide an ideal entry point for new futures traders to start small and scale up as you become more comfortable in the live markets.
*Leverage also increases the risk associated with futures trading, and only risk capital should be used for trading
Who trades E-mini Russell index futures?
E-mini Russell 2000 index futures traders can be broken down into three main groups:
- Commercial traders in the major market stock index futures are typically trading index futures to hedge their price risk on a large portfolio of stocks. These traders are typically large banks, pension funds, mutual funds, or other institutional investors.
- Large professional speculators are purely speculating on the price movement of the futures contract. Typically, commercial traders and large speculators make up 80% or more of the daily trading volume in the E-mini Russell 2000 index futures.
- Self-directed retail traders make up the remaining daily trading volume in E-mini Russell 2000 index futures. Like large professional traders, they are typically speculating only on the price movement of the futures contract.
What Impacts The Price Of E-Mini Russell Index Futures?
Although the E-mini Russell 2000 index futures market is made up of 2,000 smaller cap stocks, prices can still fluctuate significantly during the trading day and can be highly sensitive to economic news and earnings reports. There are several factors that can influence the price of a major market stock index like the Russell 2000 futures—such as changes in economic conditions and news events—which can quickly turn market sentiment. Additional factors include:
Economic indicators such as GDP growth, inflation rates, and employment data can have a significant influence on market sentiment and investor confidence. Positive economic data, such as strong GDP growth or declining unemployment rates, can drive prices for the E-mini Russell 2000 index futures higher; negative economic data can lead to a decline in prices as investors become more cautious and risk-averse.
Interest Rates and Fed policy
Changes in interest rates and monetary policy decisions can also impact the price of E-mini Russell 2000 index futures. When interest rates are low, they can stimulate borrowing and investment, which tends to boost stock prices. Conversely, when interest rates rise, borrowing becomes more expensive, potentially reducing economic activity and causing stock prices to decline.
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Risks of E-mini Russell 2000 index futures trading
Similar to other equity index futures contracts, the primary risk of trading E-mini Russell 2000 index futures is that the price will go against the trader’s position. Using appropriate trade sizing for your account size and having a robust risk management plan that includes stop losses or a trailing stop can help limit your financial exposure.
With many factors that can influence short-term and long-term performance, keeping abreast of economic activity that can impact the earnings of small cap companies—including changes in interest rates, economic reports, and US central bank (Fed) policy—is critical.
As the E-mini Russell 2000 index can be correlated to other major market indexes, it is a good idea to track the other indexes including the E-mini S&P 500 index futures, the E-mini Nasdaq 100 index futures, and the E-mini Dow index futures.
Tips to keep in mind especially for newer futures traders include:
- Practice in a futures trading simulator that reflects live market conditions until you prove to yourself that you are comfortable with the market swings. Then, when you start trading with real dollars, trade small to start, and work your way up.
- Build a well-defined futures trading plan including clear entry and exit criteria, analysis of market conditions, and a schedule for when you are and are not going to trade.
E-Mini Russell 2000 Index Futures Contract Specifications
E-mini Russell 2000 index futures contracts are standardized exchange-traded contracts that represent the value of 2,000 small cap stocks traded in the U.S. The value for a 1 point move in the standard contract is $50 or $5.00 for the 1/10 size micro contract.
Retail traders typically buy and sell E-mini Russell 2000 index futures contracts to speculate if the price will go up or down. Major market index futures contracts are cash settled at expiration. You can trade the E-mini Russell 2000 index futures on the 24-hour electronic CME Globex system.
|Standard [Asset] Futures||Micro [Asset] Futures|
|CME Globex||CME Globex|
|Contract point value||$50 USD||$5.00 USD|
|Minimum price fluctuation||.10, (50 * .10 = $5.00 per contract per-minimum move) ||.10 (5 * .10 = $0.50 per-contract per-minimum move) |
|Trading hours||Sunday 6:00 p.m. ET to Friday 5:00 p.m. ET||Sunday 6:00 p.m. ET to Friday 5:00 p.m. ET|
|Listed contracts||Quarterly: March(H), June(M), September(U), December(Z) - 9 Quarters Out and 3 Additional December Contracts||Quarterly: March(H), June(M), September(U), December(Z) - 5 Quarters Out|
|Expiration style||3rd Friday of every listed contract month ||3rd Friday of every listed contract month |
|First notice date||Not applicable||Not applicable|
|Settlement||Financially settled||Financially settled|
|Additional Specifications||View all from CME Group||View all from CME Group|
Become an E-Mini Russell 2000 index futures trader today
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