Day Trading E-mini S&P Futures

Recently, I decided to try my hand at day trading E-mini S&P futures. Based on the research I had done for a previous article on Prop Trading Firms, I decided to give it a shot. After comparing various companies that offered futures based prop trading, I finally decided to give futures trading a try.

Why Futures?


Futures are a leveraged instrument that allows you to control more capital via margin. For example, the E-mini S&P 500 futures contract is currently worth around $200,000, but can be traded for as little as $500 of margin. This is essentially 400:1 leverage.

Trade all day long:

Another benefit of trading futures is that it is available nearly 24×5. The futures market is open from Sunday 5pm Central until Friday 4pm Central. They do close between 4pm-5pm Monday thru Friday for daily maintenance, but this leaves you 23 hours per day to trade. This is particularly great for me since I work a full time job and am unable to trade during normal market hours. What I have been doing is dabbling in the overnight session when the London stock exchange opens. While it is still considered off-hours, there is typically a huge uptick of futures activity when London opens.

No Pattern DayTrader rule:

The biggest benefit of trading futures is that there is no Pattern Day Trader rule. When trading stocks or options, if you open and close a trade in the same day, that is considered a day trade. If this occurs 4 times out of 5 business days, you will be classified as a “pattern daytrader”. As a “pattern daytrader”, the SEC requires that you maintain a $25,000 balance in your account and you can not fall below this amount.

Tax Advantages:

Futures contracts are classified as a “Section 1256 Contract”. This type of trading receives beneficial tax advantages. Any profits made on futures trading is taxed at 60/40. This means on any profit earned, 60% will be taxed at the long-term capital gains rate and 40% will be taxed at the short-term capital gains rate. This can save you a lot of money every year when it comes time to pay the tax man!

Ignore company specific news:

When trading on an index based product like the /ES (E-mini S&P 500) or the /NQ (E-mini Nasdaq 100), you no longer have to worry about keeping up to date with company specific news or events. Since you are trading an index, you no longer have to worry about earnings reports or news releases that could affect the price of the stock. You will still have to pay attention to the general sentiment of the market, but you can ignore all the noise coming from specific companies.

Easy to short the market:

Another benefit of trading futures is if you believe the market will go down, you simply sell a contract. There are no worries about locate fees, or whether the broker has enough shares for you short a particular stock. With futures, you just sell a contract and the commissions and margin requirements are exactly the same as buying a contract.

Ideal instrument to daytrade:

It would seem that day trading E-mini S&P futures contracts have many benefits over traditional stocks/options. In my opinion, the biggest benefits for me are that I can trade after hours, and the significant tax benefits. Yesterday, I signed up for Apex Trader Funding, so I’ll give it a shot and will report back how I am progressing.