Looking to make money in a hurry? Let’s explore your options. You can ask for a raise from your boss, but he is cheaper than a dollar store on a clearance sale. You could get another job, but that entails working. There’s always the lottery, but you are more likely to get hit by lightning. So, what are we to do? The answer lies in trading E-minis.

E-minis are stock-index futures contracts traded electronically (from a home or office computer). They allow a trader to buy or sell a specific stock index at a specific price at a specific date in the future. Basically, you are buying stock on “contract” and then collect or lose the difference in price when you sell.

You also have the opportunity to make money when the market goes down. By “short selling”, you can essentially sell the futures contract before you buy it. For example, assume you talk to friend A who tells you they’d pay $10 for a specific CD. You know the CD is for sale at the discount store for $6. You borrow the CD from a friend B and sell the CD to friend A for $10, buy back the CD for $6, and return the CD to friend B. You pocket $4.

So, you may ask why trade e-minis over different financial instruments. First, they give you more bite than a hungry Rottweiler. If you are looking to day trade, nothing comes close to the e-minis potential. Aside from E-minis, your options are to trade stocks, options or Forex. Stocks require more to be invested up front, and with repeated bans on short selling, you can only trade one way on some stocks. If you are looking to trade stocks, then you could be forced to only trade bullish no matter how bad the markets are. With options, there are many moving variables. You have to worry about issues like expiration dates and being in or out of “the-money”. If you look at e-minis, you are looking at the best of both worlds. E-minis leverage the volatility of stock, the flexibility of options and the margin of Forex without all their weaknesses.

These instruments are significantly safer than large stock trades because for a relatively small amount you can be well diversified into a lot of holdings instead of just one big block of a single stock. Since E-minis are contracts based on indices, you are spreading your bets around S&P500 or Russell 2000 or even the Dow.

Options contracts cover only one stock. E-minis, on the other hand, provide a hedge effect with because indices cover more stocks. In this case, you won’t get burned by just one decision.

E-minis are also significantly cheaper thanks to having low margin requirements. On the Russell 2000 index, you can control around $70,000 worth of stock for around $1,000. This can mean huge profits if you’re a skilled trader, or could mean financial ruin for the careless trader.

Now is the best time to go into e-minis. The markets are moving and movement means money in day trading. In August, the VIX, a measure of volatility in the market, jumped to 37.5 from 12 at the start of the year. As more and more people struggle to make money in this crazy market, move away from the herd and blaze a trail on your own. Remember, opportunity doesn’t knock; you would have to go out and look for it. Day trading E-minis is great business to search for it.

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Filed under: Trading by Chris Dunn