NASDAQ futures Contracts are securities which allow investors to either hedge or speculate on the future value of various components of the NASDAQ index.
The NASDAQ is the largest electronically traded stock exchange in the world. It’s a composite index of all the securities traded on the NASDAQ exchange which has been continuously calculated since 1971.
All NASDAQ derived futures contracts are a product of the Chicago Mercantile Exchange (CME). They expire quarterly (March, June, September, and December), and are traded on the CME Globex exchange nearly 24 hours a day.
Several futures instruments are derived from the NASDAQ composite index: the E-mini NASDAQ composite futures, the E-mini NASDAQ biology futures, the NASDAQ-100 futures and the E-mini NASDAQ-100 futures. Let’s have a look at them all in more detail.
- NASDAQ-100 futures – NASDAQ-100 futures (ticker: ND) contract’s minimum tick is .25 index points = $25.00. While the performance bond requirements vary from broker to broker, the CME requires $17,500, and continuing equity of $14,000 to maintain the position.
- E-mini NASDAQ futures – E-mini NASDAQ futures (ticker: QCN) contract’s minimum tick is .50 index points = $10.00 While the performance bond requirements vary from broker to broker, the CME requires $4,000, and continuing equity of $3,200 to maintain the position.
- E-mini NASDAQ-100 futures – E-mini NASDAQ-100 futures (ticker: NQ) contract’s minimum tick is .25 index points = $5.00 While the performance bond requirements vary from broker to broker, the CME requires $3,500, and continuing equity of $2,800 to maintain the position.
- E-mini NASDAQ biotechnology futures – E-mini NASAQ biotechnology futures (ticker: BIO) contract’s minimum tick is .10 index points = $5.00 While the performance bond requirements vary from broker to broker, the CME requires $3,750, and continuing equity of $3000 to maintain the position.
Advantages of Trading E-Mini NASDAQ 100 Futures
Trading E-Mini NASDAQ 100 futures (NQ) offers smaller investors several distinct advantages over trading the full size NASDAQ composite index:
- Exposure – Smaller investors can get exposure to the U.S. stock market via the worlds leading stock index. Although there are many indexes, some very popular, the NASDAQ 100 is the, most actively traded and most liquid of all futures products based on a stock index.
- Affordability – The enormous appeal of the standard NASDAQ 100 futures market has caused the contract to grow beyond the reach of many investors. The Mini NASDAQ 100 allows smaller investors to trade this benchmark index at a fraction of the cost; Mini NASDAQ 100 futures require much less margin than the standard NASDAQ 100 futures.
- Opportunity – These contracts provide a variety of investment opportunities, such as: increasing or hedging portfolio exposure; spreading against other CME index products such as the NASDAQ 100, NASDAQ 100, E-Mini NASDAQ 100, Russell 2000 and/or S&P Mid Cap 400, a cost-efficient way to benefit from rising or falling equity markets.
- Integrity – CME customers and members are protected from default on futures and options contracts by the Exchanges sophisticated risk management and surveillance techniques. The CME Clearing House acts as the guarantor to each of its clearing member, thus ensuring the integrity of all trades. The CME system has proven to the outstandingly effective, even under the most stressful market conditions.
Professional fund managers use NASDAQ futures, to offset or hedge open securities positions in the market place. You can use NASDAQ E-Minis to do the same thing for your portfolio.
If you have a balanced portfolio of stocks, there’s no need to hedge each individual stock separately. That would take up far too much time and not really be practical. It’s a much better idea to hedge these open positions using an E-Mini NASDAQ futures contract. That way you’re covering yourself from a short term downward trend with one simple transaction.
If you want to learn more about trading NASDAQ futures sign-up for an account with optionsXpress where you’ll find a host of trading tutorials plus you’ll get access to a virtual trading account where you can put into practice what you’ve just learned.