Index Options & Futures - NASDAQ 100
Stock Market
Investing &
Trading System
The number of securities in the
NASDAQ 100 Index makes it an effective vehicle for investors. In
January 1994, options on the
NASDAQ 100 Index began trading on the Chicago Board Options Exchange.
The Chicago Mercantile Exchange began to trade futures and futures options
on the NASDAQ 100 Index in April of 1996. The NASDAQ 100 Index Tracking Stock
(QQQQ)
began trading on the American Stock Exchange in March 1999. In addition,
the Index is used as a benchmark for financial products in many countries
around the world.
E-Mini NASDAQ 100 Futures
E-Mini NASDAQ 100 futures trading contracts are legally binding agreements to buy
or sell the cash value of the NASDAQ 100 Index at a specific future date.
The contracts are valued by multiplying $20 by the futures price. For
example, if the E-Mini NASDAQ 100 futures trading contract is trading at 2100.00,
the value of the contract is $42,000 ($20 x 2100.00).
The minimum price movement of the futures, or tick, is 0.50 index
points or, $10 per contract. If the futures trading contract moves one tick, from
2100.00 to 2100.50, a long (buying) position would be credited $10; a
short (selling) position would be debited $10. All futures positions are
marked-to-market daily. Additional deposits into the margin account may be
required beyond the initial balance if your position moves against you.
(For an explanation of the mechanics of, and margin requirements for,
futures trading at the CME, contact your broker).
E-Mini NASDAQ 100 futures are cash settled, just like the standard
NASDAQ 100; there is no delivery of the individual stocks. Likewise,
E-Mini NASDAQ 100 daily settlements and quarterly expirations use the same
price as the standard NASDAQ 100 futures. Identical daily settlement
prices allow Mini contracts to benefit from the liquidity of the NASDAQ
100 futures.
Like the standard NASDAQ 100 futures, which are settled using a Special
opening Quotation (SOQ), to the same SOQ on the third Friday of the
quarterly contract month. The final settlement price is an SOQ of the
NASDAQ Index computed from a five-minute volume-weighted average of each
component stock’s opening prices on expiration day.
Advantages of Trading Mini NASDAQ 100 Futures and Options
Trading Mini NASDAQ 100 futures and options offers
investors several distinct advantages:
- Exposure – Investors can gain
exposure to the U.S. stock market via the world’s leading stock index.
Although there are many indexes, some very popular, the NASDAQ 100 is
the most closely watched, 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 has caused the contract to grow
beyond the reach of many investors. The Mini NASDAQ 100 contracts allow
investors to trade this benchmark index at a fraction of the cost; Mini
NASDAQ 100 futures will 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 Exchange’s 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.
The
CME is The Index Exchange, with more than 90 percent market share of
all domestically traded stock index futures and options on futures. Open
interest in the CME’s
index complex totals in excess of $138 billion, making it the world’s most
liquid trading environment for stock index products.
| 
