Stock Trading.

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% 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.

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