Comparing E-mini Stock Index Futures and ETFs
By John Lubuszewski and Brett Vietmeier ISSUE 806 | June 2009
Two of the most popular, highly liquid trading vehicles on the market today -- E-mini stock index futures from CME Group and Exchange Traded Funds (ETFs) – enable traders to capitalize on anticipated equity market movements using contracts on benchmark indexes such as the S&P 500, NASDAQ-100, Dow Jones Industrial Average and S&P MidCap 400 indexes.
But which approach is right for your needs?
Our new paper, “Comparing E-minis and ETFs,” outlines some important differences /advantages to consider between these two vehicles. Key points are summarized below. For the purposes of this discussion, E-mini S&P 500 futures were compared with two popular ETFs on the S&P 500 Index, with data as of March 17, 2009.
- Minimum Capital Requirements / Leverage Opportunities. ETFs are subject to the Federal Reserve’s 50 percent “Reg T” margin requirements, whereas the E-mini S&P 500 futures have an initial performance bond requirement (margin) of approximately 15 percent of the contract value. That offers the ability to control a larger amount of capital with less up-front deposit. (Leverage)
To trade the same nominal value of one E-mini S&P 500 contract ($38,940), you would need approximately 500 SPDR ETFs (quoted at $78.18).
- Tax Treatment. E-minis generally qualify for more favorable tax treatment than ETFs. Whereas gains from ETFs are treated as capital gains (35 percent tax rate if held less than one year), gains from futures are subject to a 60/40 rate (60 percent treated as long-term gains, 40 percent treated as short-term gains) regardless of the actual holding period.
Note: The information here should not be considered tax advice. Please consult a tax advisor regarding your personal situation.
- Related Transaction Costs. ETFs are charged a management fee by the firm administering the underlying unit investment trust. Alternatively, E-mini futures are not subject to annual fees, although there are costs associated with rolling positions from one quarterly contract to the next to maintain a position.
Click here to download a free copy of the full analysis available on the CME Group Web site or visit the CME Group Equity Index Research Center at www.cmegroup.com/equityindexresearch
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E-mini S&P 500 Futures (3) |
SPDR Trust ETF |
iShares S&P 500 ETF |
Underlying Index |
S&P 500 |
S&P 500 |
S&P 500 |
Unit Size |
$50 x Index |
~1/10th of Index |
~1/10th of Index |
Unit Dollar |
$38,940 |
$78.18 |
$78.37 |
Value of Average Daily Volume (2) |
$138.41 |
$33.98 billion |
$0.60 |
Open Trade |
$153.00 billion |
$62.70 billion |
$12.95 billion |
Trading Venue |
CME Globex |
AMEX, NYSE, |
AMEX, NYSE, |
Ticker Symbol |
ES |
SPY |
IVV |
Minimum Capital |
Minimum initial spec margin |
50% Reg T |
50% RegT |
24-Hour Trading |
Yes |
No |
No |
Operating |
None |
0.09% |
0.09% |
(1) Data sampled on March 17, 2009 |
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John Lubuszewski is Managing Director, Research and Product Development, at CME Group. Brett Vietmeier is Director, Equity Products at CME Group.
Kristina Landgraf is editor of Lind eWire. She can be reached at editor@lind-waldock.com.
Futures trading involves substantial risk of loss and is not suitable for all investors.
Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.
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