# Micro sizing

**FUT-20 · Equity Index Futures · Core**

**Lesson question:** What does smaller contract size solve?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** FUT-01

Smaller contracts permit finer exposure increments. They do not make a thesis safer or remove leverage. The combined quantity determines the actual risk.

A useful micro example begins with the desired hedge, not with the temptation to buy more because each unit looks affordable.

## Understand the mechanism

If the large contract is ten times the micro, micros can reduce rounding error in a small hedge. They may also incur more transaction fees for equivalent exposure. Liquidity should be checked separately rather than assumed identical.

Smaller size is a tool for precision, not a substitute for risk analysis.

## Walk through the process

Calculate target notional or dollars per point, compare feasible combinations and disclose the residual. Then evaluate spread, fees and funding requirements.

Do not use an unusually low broker deposit as the position-size rule.

## Operational boundary

All figures are fictional teaching inputs, not current quotes or margin schedules. Product rules, broker requirements and usable liquidity remain separate from the model example. A planned exit and an algebraic hedge are not execution guarantees.

## A worked example

A hypothetical target is 75,000 at a 5,000 index level. Each five-dollar micro represents 25,000, so three match the target. One 50-dollar-point contract represents 250,000 and would substantially overshoot it.

A ten-point move changes the three-micro position by 150, versus 500 on the larger contract. The graph scales micro notional to show how quickly small units accumulate.

## Graph: Micro sizing—worked comparison

**Horizontal:** Micro quantity  
**Vertical:** Gross notional (USD)

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/equity-futures/FUT-20.js` and displayed as an accessible table in the HTML lesson.

## What would invalidate the reading?

Accumulating many micros without summing exposure recreates the leverage supposedly avoided. Extra fees can also erode fine-grained execution benefits.

## Check your understanding

### How many 25,000-notional micros match 75,000?

**Answer:** Three.

**Why:** Aggregate notional, not the product nickname, determines size.

### What is the critical failure to avoid?

**Answer:** Accumulating many micros without summing exposure recreates the leverage supposedly avoided. Extra fees can also erode fine-grained execution benefits.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: What does smaller contract size solve? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [CME Introduction to Futures](https://www.cmegroup.com/education/courses/introduction-to-futures)

- [CME Micro E-mini overview](https://www.cmegroup.com/education/courses/micro-e-mini-futures/micro-e-mini-futures-products-overview)