E-Mini
E-mini is an electronically traded futures contract on the CME that indicates a ‘smaller version’ of the normal future contracts. E-mini enables market participation with a lower capital. In other words, it refers to a contract with miniature size of normal contracts.
Similar to indexes that has mini contracts (such as the Nasdaq 100, S&P 500, S&P MidCap 400 and Russell 2000), heavily traded commodities including gold, silver and crude oil also possess E-mini contracts. Advantages to trading E-mini contracts primarily include liquidity (means, it’s a big market!), greater affordability for individual investors (because of the lower cost in comparison with the normal contracts) and around-the-clock trading. As per the CME Group, precious metal E-minis offer the following benefits to the trader.
- Direct exposure to the price of gold/silver with smaller contracts and lower risks to diversify your portfolio
- Cash-settlement
- Access to the most liquid metals futures market in the world
- Availability around the clock, around the world on the CME Globex electronic trading platform
- Security through centralized clearing, guaranteed counterparty credit and segregation of customer funds
- Price transparency, giving all market participants equal access while maintaining anonymity in all bids and offers
Specifications of e-mini contracts vary from security to security. For instance, the E-mini S&P 500 futures contract is one-fifth the size of the standard S&P 500 futures contract. In case of E-mini Gold, it refers to ‘small’ futures contracts on gold of a third of the normal New York COMEX size of 100 ounces or 33 ounces. Similarly, E-mini Silver futures contracts on silver of half and one-fifth of the normal New York COMEX size of 5000 troy ounces.
In our opinion, E-minis are not the best way to buy gold with one's long-term investment capital, but they might be ok for speculative purposes.