Last Updated on 9 April, 2020 by Therobusttrader

The Nasdaq 100 futures are among the most highly traded contracts in the equity index sector of the futures market. As a result of its lower cost of trade and high daily trading volume, the E-mini Nasdaq 100 futures are the most popular among Nasdaq futures traders.

While traders speculate on the direction of the Nasdaq 100 Index, investors also trade the futures contracts to gain exposure to the stocks included in the index without having to own the stocks themselves.

Nasdaq 100 E-mini Contract Specifications
Symbol
NQ
Exchange
CME
Tick Size
$5
Point Value
$20
Contract Size
$20 x Nasdaq-100 Index
Contract Months
Mar, Jun, Sep, Dec
Trading Hours
Sun - Fri 6:00 p.m. - 5:00 p.m ET / Trading halt between 4:15 p.m - 4:30 p.m
Settlement
Financially Settled
Last Trading Day
Third Friday of the contract month.

 

What is the Nasdaq 100 Index?

Nasdaq Futures

Nasdaq E-mini Futures

The Nasdaq 100 Index is a stock market index that measures the performance of 100 of the largest, non-financial, and most highly traded companies listed on the Nasdaq stock exchange. Large companies from the technology, healthcare, biotech, retail, and industrial sectors are included in the index.

Tech stocks make up more than half of the index’s weight. Stocks from the retail sector, such as Amazon and travel services, make up about 25 percent of the weight. Biotech, healthcare, and industrial sector complete the index.

A modified market-capitalization weighting system is used in calculating the index. So, even though the component stocks are weighted according to their market cap, some distribution rules are in place to limit the influence of the largest companies, thereby balancing the index with all members.

The Nasdaq 100 Index was first calculated by the NASDAQ on January 31, 1985, and has been maintained by the exchange since then.

What is Nasdaq 100 E-mini futures?

Nasdaq futures are equity index futures in which the underlying asset is the Nasdaq 100 Index. The ‘E’ stands for electronically traded, while the ‘mini’ stands for a fraction of the standard contract. Thus, the E-mini Nasdaq 100 futures are electronically traded Nasdaq futures whose values are one-fifth of the standard contract. Futures are standardized, tradable contracts to receive or deliver the specified value of the underlying index on a future date, at an already agreed price.

Created in the 1990s, the E-mini Nasdaq 100 futures were introduced to offer small traders an alternative to the standard contract as the Nasdaq 100 Index rose dramatically during the dotcom bubble of the late 1990s. The trading volume of the E-mini Nasdaq 100 futures has since surpassed that of the standard contracts.

Futures are leveraged instruments, so a trader only needs a fraction of the total worth of the contract, known as the margin, to be able to trade the contract. Daily trading outcomes are marked to market, which means that at the end of every trading day, the clearinghouse of the exchange credit/debit the traders’ accounts with the profits or losses made on that day. Traders whose accounts are falling below the maintenance margin are required to top up their accounts to be able to keep their contracts.

Why trade Nasdaq 100 E-mini futures

Why Trade Nasdaq Futures?

Why Trade Nasdaq Futures?

There are many reasons to trade the E-mini Nasdaq 100 futures, such as the following:

Speculation: The majority of the traders in the equity index futures market are speculators, and the E-mini Nasdaq 100 futures have adequate liquidity and volatility which attracts speculative traders.

Hedging: Investors can use the E-mini Nasdaq 100 futures to hedge their exposure in technology stock since it has a heavy concentration of tech stocks.

Portfolio diversification: Diversification helps investors to reduce risk. Some investors use the E-mini Nasdaq 100 futures to invest in several tech stocks and non-tech stocks without owning any of those stocks.

How does the Nasdaq 100 E-mini futures trade?

The E-mini Nasdaq 100 futures are offered on the Chicago Mercantile Exchange (CME) Group to exclusively trade on the CME Globex electronic trading platforms. The market is open Sunday to Friday, from 6:00 p.m. to 5:00 p.m. Eastern Time (ET) the next day, except on Fridays when the market closes by 5:00 p.m. ET to reopen by 6:00 p.m. on Sunday. BTIC trading is available Sunday to Friday from 6:00 p.m. to 4:00 p.m. ET the next day.

A contract unit of E-mini Nasdaq 100 futures (NQ) is equivalent to $20 times the current value of the Nasdaq 100 Index. The minimum price fluctuation is as follows:

  • Outright: 0.25 index points, which is equivalent to $5.00 per contract
  • Calendar Spread: 0.05 index points or $1.00 per contract
  • BTIC (with the code NQT): 0.05 index points or $1.00 per contract

There are contracts listed for five months in the March Quarterly Cycle (March, June, September, and December). The maintenance margin requirement is $7,500, which is a little over 4 percent of the total worth of the contract.

At expiration, the contract is settled with cash. The last trading day is the third Friday of the contract month, and trading terminates at 9:30 a.m. ET. For the BTIC, trading terminates on the Thursday before the third Friday of the contract month at 4:00 p.m. ET.

How to start trading E-mini Nasdaq 100 futures

If you wish to start trading E-mini Nasdaq 100 futures, all you need is to create an account with the exchange through a futures broker and deposit the required margin. You don’t need to have the full dollar worth of the contract. However, be cautious about futures trading — while it can easily make you money, you can also lose more than you invested.

The factors that affect Nasdaq 100 E-mini futures

Many factors affect stock prices. Here are some of the factors that can affect the Micro E-mini Nasdaq 100 futures:

Trade wars: Whenever there’s news about trade wars, stock prices tend to rise and so too does the Nasdaq 100 Index and the e-mini futures contracts.

Political events: Elections, referendums, wars, and other forms of geopolitical events affect stock prices and, in turn, move the index.

Changes in interest rates: The stock market usually responds to changes in interest rates.

Value of the U.S. dollars: A falling USD often drives up stock prices, while a rising USD can lead to a decline in stock prices. Changes in the prices of the Nasdaq 100 Index’s component stocks do affect the index.

Nasdaq E-mini Futures Trading Strategies

Nasdaq Trading Strategy

Nasdaq Trading Strategy

The Nasdaq e-mini futures market is the perfect choice when it comes to building strategies ranging from daytrading systems, to swing trading strategies. There are a lot of edges that are unique to the market, and combined with the high liquidity of the market, there are many trading opportunities to explore.

If you’re interested in learning how to build trading strategies, do have a look at our guide to building trading strategies. Those of you who are interested in getting edges for a variety of markets, including Nasdaq futures, might want to have a look at our edge membership!

Conclusion

The Nasdaq 100 futures offers investors a way to hedge their exposure in tech stocks. It also provides traders an opportunity to speculate on the direction of the Nasdaq 100 Index. The contract is traded on the CME’s Globex electronic trading platform.

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