The Basics Of E-mini Dow (YM) Futures

February 26, 2019 | Dr Clifford Vance Cast | By igniteweb | 0 Comments

The United States economy has several benchmarks that regular people can use to understand how things are going.  The NASDAQ Composite is mostly about growing businesses and tech companies, and the S&P 500 follows 500 of the leading companies in America.  Then there’s the Dow Jones Industrial Average, which looks exclusively at 30 of the largest and most important publically owned corporations in the States.  This is where the E-mini Dow (YM) futures come in.

What It Is

While the stock exchanges of New York City trade ownership in companies, in Chicago they have a futures market where people bet on the future value of things like corn, oranges, cotton, oil, and other industrial products.  However, the futures market also supports speculation on other values, including the value of a stock benchmark like the Dow Jones Industrial Average.  The E-mini Dow is exactly that, a way to bet on the blue-chip companies the stock index uses.

Why You Want It

You can invest directly in the Dow Jones blue-chip companies if you like.  It’s simple enough to set up:  contact an index fund group, then invest your money in a plan that follows the Dow Jones Average directly.  However, the E-mini Dow (YM) futures offer an interesting opportunity for traders who would rather get a single investment that follows the index without needing to buy stock in each company the way an index fund will.

This singular approach comes with several advantages.  For instance, you don’t have to go through as many hoops to buy and sell shares.  You can also take advantage of the personal approach and short the futures in case you think the Dow Jones is going to have a bad month or two ahead.  There are also more futures like this one that let you invest in the future value of other market indexes, including both domestic and foreign markets.

The Specs

Before you invest in futures based on the Dow Jones Industrial Average, you should know the basic stats and figures of the E-mini Dow.

  • Traded on the Chicago Board Options Exchange as a future
  • Trading symbol is YM
  • One tick or point is worth 5 USD
  • Contract value is $5 times the Dow Jones Industrial Average
  • Intraday margin is $500
  • Contract months are end-of-quarter months:  March, June, September, and December
  • Trading hours take place from Sunday to Friday and from 6 p.m. to 5 p.m. Eastern Time
  • Position limit is 50 contracts
  • Average daily volume from January to July 2018 was 239,106

While futures markets are traditionally connected to industrial products and goods, you don’t have to limit yourself to the obvious commodities.  Futures like the E-mini Dow let you speculate on the value of things like stock indexes, interest rates, and U.S. Treasury notes.   Index futures are a recent addition, but chances are good they won’t be the last new addition to the futures market.   By trading them, you have a chance to get ahead of the market or else build yourself a safety net if your regular stock trades don’t go as well as you’d like.

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