What is the ‘S&P 500 Mini’
The S&P 500 mini is a derivative contract representing a designated fraction of the trading value of a standard S&P futures or options contract. Designed to expand the group of investors that could afford them, the S&P 500 Minis trade and act much like their pricier peers: the contracts are cash settled, follow the same expiration schedule and trade on the same stock exchanges.
Explaining ‘S&P 500 Mini’
S&P 500 Mini futures require margin on the part of the investor, while Mini options contracts are priced at 1/10 the value of the underlying S&P 500 index ($100 factor is equivalent to standard options contracts). The Mini futures contracts are marked-to-market daily, and expiration date pricing is determined by the opening price of the underlying index securities on the day of expiration.
Market demand for a product class like this developed as the S&P index grew from the 200-300 level in 1986 (when S&P 500 derivatives were first introduced) to more than 1,000 in 2007, effectively pricing individual investors out of the market as contract sizes grew to over $100,000. With the advent of the Mini, smaller investors can use the same hedging and speculation strategies available to institutional and accredited investors, and with high levels of liquidity and exchange-backed financial integrity.
Further Reading
- Quantifying reflexivity in financial markets: Toward a prediction of flash crashes – journals.aps.org [PDF]
- On the economic consequences of index-linked investing – www.nber.org [PDF]
- Post-'87 crash fears in the S&P 500 futures option market – www.sciencedirect.com [PDF]
- Board composition: Balancing family influence in S&P 500 firms – journals.sagepub.com [PDF]
- Product differentiation, search costs, and competition in the mutual fund industry: A case study of S&P 500 index funds – academic.oup.com [PDF]
- Price discovery in the S&P 500 index derivatives markets – www.sciencedirect.com [PDF]
- Intraday trading invariance in the E-mini S&P 500 futures market – papers.ssrn.com [PDF]
- Price clustering in E‐mini and floor‐traded index futures – onlinelibrary.wiley.com [PDF]
- An agent based model of the E-Mini S&P 500 applied to Flash Crash analysis – ieeexplore.ieee.org [PDF]
- Price discovery across the stock index futures and the ETF markets: intra-day evidence from the S&P 500, Nasdaq-100 and DJIA indices – www.worldscientific.com [PDF]
