The Nasdaq 100 is an index of the hundred largest non-financial stocks listed on the NASDAQ stock exchange. The companies included in this index are often technology or biotechnology firms. The Nasdaq 100 is a useful tool for investors who wish to trade technology stocks because it provides a good overview of how all tech sector stocks are performing at any given time.
In this article, we will deep dive into the most widely watched stock index in the world: the NASDAQ 100. Widely seen as the leading benchmark for the largest U.S. non-financial companies, there are multiple ways you can start index trading today to gain exposure to the NASDAQ 100. Before we discuss how to trade indices like the NASDAQ 100, let us have a look at what this index represents and the largest companies included in it.
The NASDAQ is a U.S. stock exchange based in New York City and is the second largest stock exchange in the United States measured by market capitalisation - only behind the New York Stock Exchange (NYSE). The exchange is operated by the company NASDAQ Inc. and was founded in February 1971 as the National Association of Securities Dealers Automated Quotations.
A company wanting to be listed on the NASDAQ must be registered with the Securities and Exchange Commission (SEC), have at least three market makers and meet the minimum requirements set by the exchange.
The NASDAQ 100 is an index that consists of the 100 largest non-financial companies listed on the NASDAQ stock exchange. The weight each stock has in the index is determined by its market capitalisation, meaning the higher the market cap of a particular component, the higher its influence on the index.
While the index doesn't only consist of technology companies, investors often used it to gauge the performance of the United States' biggest tech companies, since they make up a significant part of it.
The NASDAQ 100 actually consists of 102 shares. The reason for this is that some companies have two share classes - for example, Alphabet has Class A and Class C shares in the index.
The index is calculated by the market capitalisation of its constituents. The value of the index is calculated by multiplying each security’s last sale price with the aggregate value of the index share weights of each of the index securities, then dividing by an index divisor. However, no company can have more than a 24% weighting in the index.
Tip: An index divisor is a number used to compute the nominal value of a price-weighted stock market index.
The NASDAQ trading hours are as follows:
Pre-market trading hours run from 4:00 AM to 9:30 AM (ET) and after-hours trading occurs between 4:00 pm and 8:00 pm.
In the graph below we can see the NASDAQ 100 is heavily dominated by the technology sector, which makes up almost 60% of the index. Buying the index is therefore often seen as a bet on the U.S. technology sector.
The NASDAQ 100 all-time high currently stands at 16,674 points. The 52-week low is 11,878 points.
The index has seen a remarkable performance in the past decade, as seen in the chart below.
Contract for Difference (CFDs) is one of the ways you can trade the NASDAQ 100 cost-effectively and efficiently. Generally, brokers offer a CFD based on the cash index (USTECH) and a CFD based on the underlying futures contract (NAS100.fs).
When you trade the index using CFDs, you can speculate on the direction of the underlying instrument (the NASDAQ 100) without owning it or any of its constituents. You can make use of leverage and you will have the ability to go both long and short.
This can prove especially useful during a downturn. Most investors want to avoid a reshuffling of their portfolio as the costs can quickly add up and it is incredibly difficult to time the market correctly. Therefore, instead of selling a large part of your portfolio when you anticipate a correction, you could use CFDs to speculate on falling prices.
Whether the cash CFD (USTECH) or futures CFD (NAS100.fs) will be more suitable for you will primarily depend on your trading style. If you hold positions for a short period of time, you might prefer the USTECH as it has low spreads. On the other hand, if you are a long-term trader you might prefer the NAS100.fs as there are no swap charges.
Aside from trading the index itself, Axi also offers commission-free share CFDs. You can trade key constituents of the NASDAQ 100 such as Apple, Alphabet, Amazon, Facebook and Microsoft cost-effectively.
Exchange Traded Funds (ETFs) are the most popular way to invest in the NASDAQ 100 index. It is more cost-effective than buying individual shares and the rebalancing is done frequently.
As the NASDAQ 100 is a popular product, there are a variety of ETFs available. Aside from the classic ETFs that track the index (such as the QQQ managed by Invesco), there are also leveraged ETFs and ETFs that allow you to bet against the index (i.e. short the NASDAQ 100). Some of the most popular NASDAQ 100 ETFs are: Invesco QQQ, ProShares UltraPro QQQ and ProShares Ultra QQQ.
|Trading the NASDAQ 100||Investing in the NASDAQ 100|
|Ways to trade||Cash CFD, Futures CFD||ETFs, Investment Funds|
|Market hours||18:00 Sunday to 16:59 Friday (ET) with trading breaks between 16:15 to 16:30 and 16:59 to 18:00||9:30 AM to 4 PM (ET)|
|Initial capital required||0.5%||100%|
|Losses can exceed deposits||Yes||No|
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The NASDAQ 100 is influenced by a variety of factors that also move the broader stock market. This can vary from economic data, interest rates, monetary policy decisions to geopolitical events and natural disasters.
However, with the NASDAQ 100 being tech-heavy and consisting almost entirely of US-based companies, there are certain factors that affect the NASDAQ 100 more than other indices such as the US2000 or Dow Jones 30.
Earnings reports or company news from one of the heavyweights such as Apple or Amazon can have a significant influence on the overall index.
Furthermore, investors should pay close attention to the overall risk sentiment in the stock market. Tech stocks are likely to suffer the most during periods of "risk-off" as investors will move out of risky stocks and seek safe havens.
In a recent study from NASDAQ, the NASDAQ 100 outperformed the S&P 500 over the 13 years the study was held, maintaining cumulative total returns of approximately 2.5 times that of the S&P500 TR Index.
The NASDAQ 100 has outperformed the S&P 500 over the past decade. However, this was accompanied by higher volatility, as visible in the chart above. It is also worth noting that the S&P 500 offers greater diversification. Not just due to the fact that it consists of 500 instead of 100 companies, but also because the index is not heavily dominated by one single sector as is the case with the NASDAQ 100.
Despite that, the NASDAQ 100 remains a great tool for tracking the performance of the largest U.S. technology companies. Some investors may also prefer buying the index instead of investing in the individual components. NASDAQ has rules in place that prevent one company from gaining too much weight in the index, which is useful.
NASDAQ has several eligibility criteria that companies need to meet to be part of the NASDAQ 100 index:
NASDAQ picks the constituents for the index once per year, in December. The index is rebalanced on a quarterly basis - i.e. in March, June, September, and December.
The top 10 companies in the NASDAQ 100 index are:
Together, those 10 heavyweights make up more than half of the entire index. While some investors don't mind the fact that the index is heavily dominated by only 10 companies, others might prefer indices that are more balanced.
|AAPL||Apple Inc. Common Stock|
|ADBE||Adobe Inc. Common Stock|
|ADI||Analog Devices, Inc. Common Stock|
|ADP||Automatic Data Processing, Inc. Common Stock|
|ADSK||Autodesk, Inc. Common Stock|
|AEP||American Electric Power Company, Inc. Common Stock|
|ALGN||Align Technology, Inc. Common Stock|
|AMAT||Applied Materials, Inc. Common Stock|
|AMD||Advanced Micro Devices, Inc. Common Stock|
|AMGN||Amgen Inc. Common Stock|
|AMZN||Amazon.com, Inc. Common Stock|
|ANSS||ANSYS, Inc. Common Stock|
|ASML||ASML Holding N.V. New York Registry Shares|
|ATVI||Activision Blizzard, Inc. Common Stock|
|AVGO||Broadcom Inc. Common Stock|
|BIDU||Baidu, Inc. ADS|
|BIIB||Biogen Inc. Common Stock|
|BKNG||Booking Holdings Inc. Common Stock|
|CDNS||Cadence Design Systems, Inc. Common Stock|
|CDW||CDW Corporation Common Stock|
|CERN||Cerner Corporation Common Stock|
|CHKP||Check Point Software Technologies Ltd. Ordinary Shares|
|CHTR||Charter Communications, Inc. Class A Common Stock New|
|CMCSA||Comcast Corporation Class A Common Stock|
|COST||Costco Wholesale Corporation Common Stock|
|CPRT||Copart, Inc. (DE) Common Stock|
|CRWD||CrowdStrike Holdings, Inc. Class A Common Stock|
|CSCO||Cisco Systems, Inc. Common Stock (DE)|
|CSX||CSX Corporation Common Stock|
|CTAS||Cintas Corporation Common Stock|
|CTSH||Cognizant Technology Solutions Corporation Class A Common Stock|
|DLTR||Dollar Tree Inc. Common Stock|
|DOCU||DocuSign, Inc. Common Stock|
|DXCM||DexCom, Inc. Common Stock|
|EA||Electronic Arts Inc. Common Stock|
|EBAY||eBay Inc. Common Stock|
|EXC||Exelon Corporation Common Stock|
|FAST||Fastenal Company Common Stock|
|FB||Meta Platforms, Inc. Class A Common Stock|
|FISV||Fiserv, Inc. Common Stock|
|FOX||Fox Corporation Class B Common Stock|
|FOXA||Fox Corporation Class A Common Stock|
|GILD||Gilead Sciences, Inc. Common Stock|
|GOOG||Alphabet Inc. Class C Capital Stock|
|GOOGL||Alphabet Inc. Class A Common Stock|
|HON||Honeywell International Inc. Common Stock|
|IDXX||IDEXX Laboratories, Inc. Common Stock|
|ILMN||Illumina, Inc. Common Stock|
|INCY||Incyte Corp. Common Stock|
|INTC||Intel Corporation Common Stock|
|INTU||Intuit Inc. Common Stock|
|ISRG||Intuitive Surgical, Inc. Common Stock|
|JD||JD.com, Inc. American Depositary Shares|
|KDP||Keurig Dr Pepper Inc. Common Stock|
|KHC||The Kraft Heinz Company Common Stock|
|KLAC||KLA Corporation Common Stock|
|LRCX||Lam Research Corporation Common Stock|
|LULU||lululemon athletica inc. Common Stock|
|MAR||Marriott International Class A Common Stock|
|MCHP||Microchip Technology Incorporated Common Stock|
|MDLZ||Mondelez International, Inc. Class A Common Stock|
|MELI||MercadoLibre, Inc. Common Stock|
|MNST||Monster Beverage Corporation|
|MRNA||Moderna, Inc. Common Stock|
|MRVL||Marvell Technology, Inc. Common Stock|
|MSFT||Microsoft Corporation Common Stock|
|MTCH||Match Group, Inc. Common Stock|
|MU||Micron Technology, Inc. Common Stock|
|NFLX||Netflix, Inc. Common Stock|
|NTES||NetEase, Inc. American Depositary Shares|
|NVDA||NVIDIA Corporation Common Stock|
|NXPI||NXP Semiconductors N.V. Common Stock|
|OKTA||Okta, Inc. Class A Common Stock|
|ORLY||O'Reilly Automotive, Inc. Common Stock|
|PAYX||Paychex, Inc. Common Stock|
|PCAR||PACCAR Inc. Common Stock|
|PDD||Pinduoduo Inc. American Depositary Shares|
|PEP||PepsiCo, Inc. Common Stock|
|PTON||Peloton Interactive, Inc. Class A Common Stock|
|PYPL||PayPal Holdings, Inc. Common Stock|
|QCOM||QUALCOMM Incorporated Common Stock|
|REGN||Regeneron Pharmaceuticals, Inc. Common Stock|
|ROST||Ross Stores, Inc. Common Stock|
|SBUX||Starbucks Corporation Common Stock|
|SGEN||Seagen Inc. Common Stock|
|SIRI||Sirius XM Holdings Inc. Common Stock|
|SNPS||Synopsys, Inc. Common Stock|
|SPLK||Splunk Inc. Common Stock|
|SWKS||Skyworks Solutions, Inc. Common Stock|
|TCOM||Trip.com Group Limited American Depositary Shares|
|TEAM||Atlassian Corporation Plc Class A Ordinary Shares|
|TMUS||T-Mobile US, Inc. Common Stock|
|TSLA||Tesla, Inc. Common Stock|
|TXN||Texas Instruments Incorporated Common Stock|
|VRSK||Verisk Analytics, Inc. Common Stock|
|VRSN||VeriSign, Inc. Common Stock|
|VRTX||Vertex Pharmaceuticals Incorporated Common Stock|
|WBA||Walgreens Boots Alliance, Inc. Common Stock|
|WDAY||Workday, Inc. Class A Common Stock|
|XEL||Xcel Energy Inc. Common Stock|
|XLNX||Xilinx, Inc. Common Stock|
|ZM||Zoom Video Communications, Inc. Class A Common Stock|
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The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.
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