More Bang for Your Buck
As a trading vehicle, nothing beats futures in terms of cost efficiency, liquidity and, for some, tax treatment. Take a look below.
First, note the “Futures USD Notional,” which is the true (unmargined) size of each product. The profit/loss of a 10% move in the /ES futures would be a $176,800 x 10% = $17,680 move in the hold of the /ES contract. The “buying power” is roughly $13,200, or 8% of the current value of the index.
That’s why futures are so cost-efficient. A very little amount of money is required to trade a large amount of money.
First-time futures traders should start small. The Nasdaq (/NQ) can easily move $2,000 a day, and natural gas futures are inappropriate for novices. Instead, consider the much smaller Small Exchange (/STIX, /SM75, /SPRE or /SFX) or CME Exchange micro (/MES, /MYM, /MGC, /M6E) contracts.
Sign up for free cherry picks and market insights at info.tastytrade.com/cherry-picks
Michael Rechenthin, Ph.D. (aka “Dr. Data”), heads research and data science at tastytrade. @mrechenthin
