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E-mini S&P500 vs. SPY
The SPY and the e-mini S&P500 (ES) are both the same in the sense that they both utilize the S&P 500 index. The S&P 500 index is a weighted index of the prices of 500 large-cap common stocks. The stocks included in the S&P 500 trade on either the NYSE or the Nasdaq, two of the United States' largest stock market exchanges. While the ES and SPY are both the same in the sense that they both utilize the S&P 500, there are substantial variations which differentiate the ES from the SPY & give the ES a significant competitive advantage relative to the SPY.
What are the differences between the e-mini S&P500 index and SPY?
To begin with, the SPY is an Exchange Traded Fund (or ETF, for short). The SPY trades in SPDRs (100 shares of the Standard & Poor's Depositary Receipts), while the Emini trades in futures contracts.
To break this down further: 1 E-mini S&P 500 index contract = 500 SPY shares. 1 E-mini SP500 Point = .10 SPY cents. Additionally, 1 E-mini SP500 Point is $50.00 USD = .10 SPY cents (times 500 shares) is $50.00 USD.
Is the e-mini S&P500 futures better than SPY?
There are several key advantages and benefits of the Emini S&P500 Index, which is why Trading Advantage® trades the ES instead of the SPY.
One major disadvantage of the SPY is that it locks traders in their positions overnight whereas the ES allows traders to trade the market over 23 hours a day. In fact, the only time a trader can't place a trade in the E-mini S&P500 is between 3:15 CT to 3:30 CT, between the Pit Session and the Globex Session.
The spreads can be wider in the E-mini S&P500. This is advantageous for professional traders and potentially detrimental to retail traders. However, it is imperative to note that Trading Advantage®'s mission is to train aspiring futures traders to reach a professional skill level in their trading technique. Therefore, the wider spreads would be advantageous for successful Trading Advantage®'s students.
The Emini SP500 is a zero-sum market, meaning when one person gains a specified amount of capital, another person loses the same specified amount, less commissions and fees. Additionally, the Emini SP500 is an extremely liquid market with fast-moving prices. Furthermore, the mini S&P offers greater leverage than the SPY and it also offers a lower initial margin requirement.
*Futures and Options Trading involves substantial risk, and is not suitable for all investors. Past performance is not necessarily indicative of future results.
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