Tick sizes serve to allow you to measure how much prices change each day, whether prices rise or fall, and how that affects your gains or losses. This makes tracking the market easier and more precise.
What is a futures tick size?
Index futures contract specs
Futures contracts have a standardized price fluctuation minimum known as a tick. Each futures exchange sets these specifications to ensure efficient and liquid markets by maintaining “tight” bid/ask spreads. Tick sizes can vary widely depending on the contract type, the financial instrument’s size, and market requirements.
Traders should understand tick sizes and tick values because they are essential for measuring investment performance over various time periods. Unfamiliarity with a contract’s tick size could result in opening positions that are either too large or too small, complicating the assessment of trading outcomes.
One of the most actively traded futures contracts in the United States is the ES future (E-Mini).
Other CME Group e-mini futures contracts:
- Nasdaq-100 Index (NDX)
- Dow Jones Industrial Average ($DJI)
- Russell 2000 Index (RUT)
Are futures right for your trade plan?
When considering futures, it’s important to understand how tick sizes and values impact your trading. Let’s look at the S&P 500 futures (ES). The contract value is $50 times the index level. For example, if the index is at 5,400, the contract value is $270,000. Each tick is one-quarter of an index point, translating to $12.50 per tick.
So, if the E-Mini (ES) moves 20 points, your gain or loss would be:
- Number of Ticks: 20 points / 0.25 tick size = 80 ticks
- Profit/Loss: 80 ticks x $12.50 per tick = $1,000
For other futures contracts like the MES, the numbers change, but the principles stay the same:
- Number of Ticks: 20 points / 0.25 tick size = 80 ticks
- Profit/Loss: 80 ticks x $1.25 per tick = $100
Other micro contracts, like E-mini Nasdaq-100 futures, E-mini Dow futures, and E-mini Russell 2000 futures, follow similar rules, though with different tick values.
