For new traders opening an account with the NinjaTrader online futures broker, it can be helpful to understand how to calculate futures value. To do so, let’s start with an example.

      Say you own $240,000 of stock in the S&P 500 Index market at the price of 1400.00, and you would like to “hedge”, or protect your long position because you’re wary of the economy going into a tailspin.

      You would then calculate the Futures value at 1400.00 for the E-mini SP500:

      For each full rotation of the contract, or “handle”—in this case, 1400.00 to 1401.00, is worth $50. How do we get this? By seeing that this contract has 4 “ticks” per handle (in this case, a tick is 0.25)

      • 1400.00-1400.25 (worth $12.50 per one contract)
      • 1400.25-1400.50 (worth $12.50 per one contract)
      • 1400.50-1400.75 (worth $12.50 per one contract)
      • 1400.75-1401.00 (worth $12.50 per one contract)

      Next, we take $50 x 1400.00:

      • $50 x 1400.00 = $60,000

      Now, using your portfolio value of $240,000, we divide that by $60,000.

      • $240,000 / $60,000 = 4

      With the above calculations, we arrive at the conclusion that in order to properly hedge your portfolio, you would need to sell 4 E-mini SP500 Futures contracts. In the above example, you would need a minimum of $2,000 in your account to hedge your $240,000 position. In short, you can see how Futures provides traders with the opportunity for success.

      *It’s also important to note that each Futures contract requires approximately $500 of collateral or “margin” to fund this position—be sure to check with your FCM (Futures Commission Merchant) for specific margin requirements for your trading.

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