ES 50 multiplier

Discussion in 'Index Futures' started by Mr_F, Sep 11, 2002.

  1. Mr_F


    I understand how to caculate profit/loss on the the ES using the $50 multiplier. However, I cannot wrap my mind around the method by which we come up with the 50 multiplier. Can someone please reconcile this in a simple and easy to understand way? :confused:
  2. Quah


    Because the e-mini is 1/5 of a full contract (SP). SP is $250 a point.
  3. Mr_F


    Quah, maybe this is the right question. Why is the SP worth $250 a point? (i note the SP and ES prices appear to be apples to apples)

  4. Pabst


    The CME "arbitrarily" sets the contract specs. Actually until 1997 the SP was 500x index. The math is easy, 250x the index =$250.00 per point, 50x index=$50.00 per point. If you can't grasp that, trading 'em is gonna be a real bitch.
  5. Hendrix


    Mr F
    If I understand your question correctly.....

    It is simply a nominal amount set by the exchange at the time it created the contract. Different futures contracts have different multipliers, just as different company's stock has different par values (I assume you have par values in the US?)

    The exchanges don't necessarily pluck a number out of the air to decide the multiplier. The main determination (I imagine) is how big they want the contract to be. For example, 1 big S&P contract is worth $226,525 at the current closing price of 906.10, so, IN EFFECT, buying one buys you control of $226,525 worth of a basket of stocks replicating the S&P 500 index.

    And if I remember correctly (NOT a given) I seem to remember they cut the multipler of the big contract a few years ago (pre E-mini days) from 500 because the contract was getting too big??
  6. Hendrix


    It obviously took me more than 7 minutes to write the above!! Good thing I'm not Aphie......I wouldn't have time to eat or sleep.
  7. Pabst


    Hendrix. Often by the time I can type a reply the thread's closed. Your explanation was better than mine anyway.
  8. Mr_F


    Now I understand. Thanks for the explanation and thanks to others who responded...:cool:

    Good luck and good trading...:)
  9. gnome


    Yes, they cut it in half. That way, to control the same amount, we had to pay 2X the commission... the FCMs (at least not mine) didn't cut the commissions in half. What a screw job.
  10. Pabst


    I know for a fact, that commission enhancement was the goal. Not only for the firms, but for the floorbrokers. Also minimum tick was .05 for $25.00, then new multiplier still kept $25.00 tick except min. fluctuation is now .10
    #10     Sep 12, 2002