Options Trading System

About Nasdaq 100 Index

If you ask a trader about the most popular and most traded indexes on the US market, without a doubt, you will receive as an answer, "NASDAQ 100, S&P 500 and Dow Jones Industrial (DJI) indexes. The Nasdaq 100 index (symbol is NDX) is based on a group of the largest non-financial companies listed and traded on the Nasdaq 100 stock exchange. This index is value-weighted and contains no financial companies. This index therefore differs from the S&P500 and the Dow Jones Industrial Average (DJI, Dow 30 or simply DOW).

Nasdaq 100 began its life on January 31, 1985 together with the NASDAQ Financial -100 Index. This explains why the financial companies were excluded, and still are excluded, from the Nasdaq 100 index. To be included in the Nasdaq 100 index, a security must meet many criteria, such as being a non-financial company, not being part of a bankruptcy proceeding, and demonstrating the required performance over the specified period of time, and more. Inclusions in the index and deletions from it are done on a quarterly basis.

There are several ways to trade the NASDAQ 100 index. Two of the most popular methods are trading the QQQ and trading the NASDAQ 100 emini futures (traded under the NQ ticker). Both of these trading vehicles track the performance of the index.

The QQQ stock is one of the world's most traded stocks. Previously traded as QQQ (three Qs), the Nasdaq 100 tracking stock symbol was changed on December 1, 2004 to a four-letter symbol QQQ and moved from the AMEX exchange to the NASDAQ exchange. At present, QQQ is sponsored by Powershares and the official name of the Nasdaq 100 tracking stock is "Powershares QQQ."

As with other Exchange Traded Funds (ETFs), there are several advantages to trading the Nasdaq 100 tracking stock: one can buy and sell it at any time during the trading day, it has a broad market portfolio (diversification among the Nasdaq's largest 100 non-financial companies), it can be bought on margin, there are no management and sponsor fees, it involves low ownership costs, and it offers the flexibility of a stock and power of mutual funds, etc.

There are over 400 different tools for use in trading the Nasdaq 100 index, beside investing in the QQQ stock Some of them are the NASDAQ 100 futures (ND) NASDAQ 100 emini (NQ), NASDAQ 100 Index Options, Rydex index tracking funds, Ultra Short QQQ ProShares (QID), and ProShares Ultra QQQ (QLD), etc. Investors should remember that it is possible that, for short periods of time, despite the fact that all of these securities and commodities are designed to track the index's performance, these securities and commodities may not fully replicate the performance of the index due to the temporary unavailability of certain index securities in the secondary market or to other extraordinary circumstances.