Futures trading offers a compelling opportunity for traders to profit from price movements in various markets, including commodities, stock indices, bonds, and currencies. One of the primary factors that attract traders to futures is their leverage, which allows for controlling a large position with a relatively small amount of capital. However, when considering the cost of trading futures, it’s essential to look beyond leverage and consider factors like margin requirements, contract sizes, volatility, and commission fees. Understanding what constitutes “cheap” futures to trade can help beginner and seasoned traders alike optimize their strategies and manage risk effectively.
This article will explore some of the cheapest futures markets to trade based on low margin requirements, contract sizes, and associated costs, and why these markets are ideal for traders looking for cost-effective ways to participate in futures trading.
1. Micro E-mini Futures
One of the most accessible futures markets in terms of cost is the Micro E-mini Futures contracts. These contracts were introduced by the Chicago Mercantile Exchange (CME) to make trading in major indices more affordable to retail traders. Micro E-minis are essentially smaller versions of the standard E-mini contracts, which have been popular for trading stock indices like the S&P 500, Dow Jones Industrial Average, Nasdaq-100, and Russell 2000.
Micro E-mini S&P 500 (MES): This contract tracks the S&P 500 index and is 1/10th the size of the E-mini S&P 500 contract. The margin requirement for trading a Micro E-mini S&P 500 contract is significantly lower than the standard contract, with many brokers requiring as little as $50 to $100 in day trading margins.
Micro E-mini Nasdaq-100 (MNQ): Similarly, the Micro E-mini Nasdaq-100 is 1/10th the size of the E-mini Nasdaq-100, tracking the top 100 non-financial companies listed on the Nasdaq exchange. The day trading margin for this contract is also quite low, making it affordable for retail traders looking to gain exposure to tech-heavy stocks.
Micro E-mini Dow (MYM): For those looking to trade the Dow Jones Industrial Average, the Micro E-mini Dow offers a low-cost entry. Like the others, it’s 1/10th the size of the regular E-mini Dow contract, and margin requirements are in the same range as other Micro contracts.
Micro E-mini Russell 2000 (M2K): The Micro E-mini Russell 2000 is another popular contract, tracking small-cap stocks in the Russell 2000 index. It’s ideal for traders who want exposure to smaller companies but need to keep their trading costs low.
Why Micro E-minis Are Cheap to Trade:
Low Margin Requirements: Micro E-minis require significantly lower margins compared to full-size futures contracts. This makes them accessible for traders with smaller accounts.
Smaller Contract Size: With a notional value that’s 1/10th of the E-mini contracts, traders can control smaller positions and take on less risk.
Tight Spreads: These contracts are highly liquid, meaning tight bid-ask spreads, which reduces the cost of entering and exiting trades.
2. Crude Oil Micro Futures (MCL)
Crude oil is one of the most actively traded commodities in the world, but the standard WTI Crude Oil futures contract (CL) can be too large and expensive for many retail traders due to its high margin requirements and volatility. To make crude oil trading more accessible, the CME introduced Micro Crude Oil Futures (MCL).
Micro Crude Oil contracts are 1/10th the size of standard WTI Crude Oil contracts, making them much cheaper to trade in terms of both margin and contract size.
Micro WTI Crude Oil (MCL): The Micro WTI Crude Oil futures contract tracks the price of West Texas Intermediate (WTI) crude, one of the most widely used benchmarks for global oil prices. The margin requirements for Micro WTI Crude are significantly lower than the standard contract, with day trading margins as low as $100 to $150 per contract, depending on the broker.
Why Micro Crude Oil Futures Are Cheap to Trade:
Reduced Margin Requirements: The smaller size of the Micro Crude Oil contract allows traders to access the crude oil market with less capital.
Smaller Contract Size: Controlling just 100 barrels of oil, compared to 1,000 barrels in the standard contract, traders can manage smaller positions and reduce risk.
3. Corn Futures (ZC)
Corn is one of the most affordable futures contracts in the agricultural commodities sector. Corn futures are widely traded due to their use as a key input in food production, animal feed, and biofuel.
Corn (ZC): Corn futures are traded on the Chicago Board of Trade (CBOT), and each contract represents 5,000 bushels of corn. While the contract size might seem large, the margin requirements for corn futures are relatively low, with some brokers requiring as little as $500 to $700 in initial margin. Corn futures also tend to have lower volatility compared to some other agricultural products, which can make them a less risky option for beginners.
See Also: What is the Basis Price of Futures?
Why Corn Futures Are Cheap to Trade:
Low Volatility: While corn futures can be volatile during certain periods (such as planting and harvest seasons), they tend to be less volatile than energy or metal futures, reducing the risk of large, unexpected price swings.
Lower Margin Requirements: Compared to other agricultural futures like wheat or soybeans, corn futures typically have lower margin requirements, making them more accessible to small traders.
4. Micro Gold Futures (MGC)
Gold is often viewed as a hedge against inflation and economic uncertainty, and its futures contracts are popular among traders. However, the standard Gold Futures (GC) contract can be expensive due to its large contract size and high margin requirements.
For traders looking for a cheaper way to trade gold, the CME offers Micro Gold Futures (MGC), which are 1/10th the size of the standard contract.
Micro Gold (MGC): The Micro Gold futures contract represents 10 troy ounces of gold, compared to the standard contract’s 100 troy ounces. With lower margin requirements (often around $200 to $300 for day trading), traders can gain exposure to the gold market with less capital and risk.
Why Micro Gold Futures Are Cheap to Trade:
Smaller Contract Size: The reduced size of the Micro Gold contract allows traders to control smaller positions and manage risk better.
Lower Margin Requirements: The margin required to trade Micro Gold is much lower than the full-size Gold Futures contract, making it more accessible to retail traders.
5. Natural Gas Micro Futures (QG)
Natural gas is another heavily traded commodity, and like crude oil, the standard Natural Gas Futures (NG) contract can be quite large and volatile. However, the E-mini Natural Gas Futures (QG) offers a cheaper alternative for traders.
E-mini Natural Gas (QG): This contract represents 2,500 million British thermal units (MMBtu) of natural gas, compared to the 10,000 MMBtu in the standard contract. Margin requirements for QG are lower, typically around $500 to $1,000 depending on market conditions.
Why E-mini Natural Gas Futures Are Cheap to Trade:
Smaller Contract Size: With 1/4th the size of the standard contract, traders can take on smaller positions and reduce their exposure to natural gas price swings.
Lower Margin Requirements: The smaller contract size comes with lower margin requirements, making it easier for traders to enter the market.
Conclusion
Trading futures doesn’t have to be expensive. With the rise of micro futures contracts and other cost-effective options, traders can access a wide range of markets without needing large amounts of capital. Whether you’re interested in stock indices, commodities like crude oil or gold, or agricultural products like corn, there are cheap futures contracts available that cater to small retail traders.
Micro E-mini futures, Micro Crude Oil, and Micro Gold contracts provide affordable alternatives to their full-size counterparts, while products like corn and E-mini Natural Gas offer low-cost ways to trade in the commodities markets. By focusing on these cheaper futures contracts, traders can manage their risk, limit capital outlays, and participate in the dynamic world of futures trading.
