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Futures Measures

Taking a Smaller Bite in Futures: Minis and Micros

Futures Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Futures have their advantages, but the margin requirements are often too large for a tastybite sized account. However, there are micro futures that smaller accounts can access.

A table of the Euro (/6E), Gold (/GC), Crude Oil (/CL) and Natural Gas (/NG) was displayed. The table included the contract, current quote, notional value and margin required.

There are micro contracts available for some, but not all futures contracts. The size of the contracts are much smaller (50% to 90% smaller), meaning the Delta exposure and margin requirements are much less. Many of the micro futures have good liquidity.

When we are looking for an opportunity in equities or ETFs, we check the implied volatility and implied volatility rank (IVR). Since this is not calculated for futures we use their ETF counterparts as a proxy.

The highest IV and IVR is currently found in Crude Oil. There are no futures options for the smaller Crude Oil contract but a spread can be sold in the large contract to replicate one. This provides the opportunity for cost basis reduction.

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