Financial Futures Contracts -- NASDAQ 100 And Russell 2000

 

Many day traders like to work with NASDAQ stocks, because they tend to be more high tech, sexy and popular. Although the big bubble of the 1990s burst, they are still highly volatile.

The regular NASDAQ 100 contract is $100 X the index value. It's quoted in dollars. One tick is $25 per .25 points.

The e-mini NASDAQ 100 contract is one-fifth the above. The contract is $20 X the index value, and one tick is $5 per .25 points.

The NASDAQ 100 is an index of the 100 largest stocks listed on the NASDAQ exchange, by market capitalization (though with certain rules capping the percentage of some of the largest component companies).

Margin is high. The contract sizes are relatively large, and the index is volatile. It can swing fast, quickly. You can lose a lot of money quickly, so it's probably just as well it's most popular with day traders. It's dangerous for anyone working a day job. The index can swing 50 to 60 points in one day. At $100 per point, that's a $5-6K profit or loss just in one day.

They are traded electronically twenty-four hours a day on The CME Group, on the CME Globex Exchange. These contracts began trading in 1997. Because this is a contract based on the value of the index, not on actual stocks held, you don't receive any dividends (and most NASDAQ exchange listed stocks don't pay dividends anyway).

CME margin guidelines for the NASDAQ 100 e-mini contract are from 5-20% of the position size.

The NASDAQ 100 index does not financial stocks. It does include companies incorporated outside the United States. The index itself began January 31, 1985 The base price was initially set at 250, but on December 31, 1993, with the initial index at close to 800, it was reset to 125 as of January 1, 1994. Its all-time high is 4,700 reached during the height of the dot com/hi tech boom.

The regular size NASDAQ futures use the Reuters Instrument Code ND and the e-mini version uses the code NQ.

Russell 2000 futures contracts are $100 X index value. One tick is $10, for .10 of a point.

The Russell 2000 index includes small cap stocks, so this index is considered representative of how small companies are doing in the economy. It's the recognized benchmark for fund managers in that area.

Small cap stocks can be volatile, because they are small. They are pushed up a lot by good news, and pushed down a lot by bad news. Plus, it's believed they are the first to benefit from an economy that's recovering following a recession, and the first to go down when an economy is slowing down following a boom period.

There is a Russell 1000 index futures contract, but it's thinly traded, so stock with the Russell 2000.

 

WRITTEN BY

Richard Stooker

You can accumulate a large portfolio of income-producing investments. Discover how investing for income can help you retire with financial security. Learn more about investing for income and Thomas Properties Group.

 

Author

Richard Stooker

August 18, 2010 

 https://sooperarticles.com/finance-articles/investing-articles/financial-futures-contracts-nasdaq-100-russell-2000-131990.html

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