Trading emini futures, or futures contracts in general, attracts many traders who want to become. This is due in part if not mainly to the huge leverage that they offer. To understand what we mean by this, note that sometimes, to control a single emini lot, all you have to do is deposit $500. Now, obviously, this is usually just enough to cover the minimum margin; To actually trade, you need to deposit a bit more, but not much more than that, relatively speaking. Twice that would be fine.
Now suppose you already have a large amount in your futures account with a broker who set the emini day trading margin at just $500. Also suppose what you want to trade is the ES, the emini contract of the S&P 500. Since 1 pip of this instrument is worth $50 and its price these days (April 2007) is around 1450, it is very easy to see how much dollar value you can control with $1000 . It is simply 50 * $1,450 = $72,500. That’s right: a paltry $1,000 (or even $500 in principle, though only in theory) can control up to $72,500!
Now, with the same amount ($1,000), you will be able to control a maximum of $2,000 of the share value provided you have a margin account. This is how futures contracts offer significant leverage. It is in fact huge compared to almost all other trading instruments except currency pairs, where the leverage involved can be greater, and spread betting which gives you a power similar to that of leverage.
Obviously, it is important to remember that leverage this high is a double-edged sword, which is why it must be used wisely. What this means for most traders is that they should probably simply stick with the stocks.