Trading emini futures, or futures in general, attracts many aspiring traders. This is due, in part, if not mainly, to the huge leverage they offer. To understand what we mean by this, keep in mind that sometimes to control an emini contract all you need to do is deposit $500. Now obviously this is usually enough just to cover the minimum margin; to trade you really need to deposit a bit more, but not much more, relatively speaking. Twice that would be fine.
Now suppose that you do in fact have a large in your futures account with a broker who set the emini day trading spread at just $500. Also assume that what you want to trade is ES, the emini contract of the S&P 500. Given that a Since this instrument equals $50 and its price these days (April 2007) is around 1450, it’s pretty easy to figure out how much dollar value you can control with your $1,000. It is simply $50*1450=$72,500. That’s right: your measly $1,000 (or even $500 in principle, if only in theory) can control as much as $72,500!
Now with the same amount ($1,000) you could control at most $2,000 worth of a stock as long as you have a margin account. This is how they offer high leverage futures. In fact, it’s huge compared to virtually every other trading instrument, with the exception of currency pairs, where the leverage in question can be even higher, and spread betting that gives you comparable leverage power.
Obviously, it is important to remember that leverage this high is a double-edged sword and should therefore be used wisely. What this means for most traders is that maybe they should just stick with stocks.