Chapter 6. The Path of Least Resistance

It was 1982 and I was working for a large brokerage firm in Oklahoma City. I had anticipated this day for weeks. The Chicago Mercantile Exchange (CME) was finally launching its new product, the S&P 500 index futures. I had been reading about this new kid on the block for some time, and now it was finally my turn to play. The overall market was bullish. The major indexes were looking healthy and moving up steadily. I knew the excitement that surrounded this new CME trading venue, and I suspected that prices would move up quickly once it was off and running. Therefore, on my first day of trading, I joined the bulls. I remember little else about the day except that I went long and I made money. My first experience with the S&P futures was a positive and exciting one. From that moment on, I was hooked on trading the equity index futures.

Since that time, I have traded it literally thousands of times. I enjoy buying and selling the S&P for several reasons. First, I like the leverage. It is possible to trade the S&P futures, Dow futures, and Nasdaq futures with a relatively small account balance. Many brokerage firms allow you to trade one mini futures contract for as little as $2500 per contract. Some brokerage houses require even less. At the time of this writing, the mini-S&P is trading in the $1400 range. There are four ticks to a point and the value of each point is $50. That means that each small or mini S&P contract controls approximately ...

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