NASDAQ futures are financial futures that allow an investor to hedge with or speculate on the future value of various components of the NASDAQ market index.
Several futures instruments are derived from the Nasdaq composite index, these include the E-mini NASDAQ composite futures, the E-mini NASDAQ biology futures, the NASDAQ-100 futures, and the E-mini NASDAQ-100 futures.
NASDAQ derived futures
All of the NASDAQ derived future contracts are a product of the Chicago Mercantile Exchange (CME).
They expire quarterly (March, June, September, and December), and are
traded on the CME Globex exchange nearly 24 hours a day, from Sunday
afternoon to Friday afternoon.
- E-mini NASDAQ futures (ticker: QCN) contract's minimum tick is .50 index points = $10.00 While the performance bond requirements vary from broker to broker, the CME requires $4,000, and continuing equity of $3,200 to maintain the position.
- E-mini NASDAQ biotechnology futures (ticker: BIO) contract's minimum tick is .10 index points = $5.00 While the performance bond requirements vary from broker to broker, the CME requires $3,750, and continuing equity of $3000 to maintain the position.
- E-mini NASDAQ-100 futures (ticker: NQ) contract's minimum tick is .25 index points = $5.00 While the performance bond requirements vary from broker to broker, the CME requires $3,500, and continuing equity of $2,800 to maintain the position.
Quotes
CME Group provides live feeds for Nasdaq Futures and these are published on various websites like Bloomberg.com, Money.CNN.com,NasdaqFutures.org.
Trading strategies
Futures contracts are commonly used for hedge or speculative
financial goals. Futures contracts are used to hedge, or offset
investment risk by commodity owners (i.e., farmers), or portfolios with
undesirable risk exposure offset by the futures position.
Futures are also widely used to speculate trading profits.
Futures trading is skyrocketing – CME's E-mini contracts averaged 3.5
million contracts a day in 2008, a 37 percent yearly increase in volume,
while equity volume increased only 2 percent for the same period of
time. However studies reveal that hedging strategies still dominate speculation trade activity in every futures market studied.
Investment in trading algorithms
research (a mathematical rule set for futures trading entry, exit, and
stop loss points often calculated and executed by computer) is
phenomenal. Investment banking firm Goldman Sachs devotes more of its
resources, tens of millions annually, to developing trading algorithms
than it does on trade desk staffing.
Trading algorithms may be as exotic as biology theorems like neural
network applied to financial market trading by Gang Dong of Rutgers
University, or completely based on current market time/price analysis.
US tax advantages
In the United States broad-based index futures receive special tax treatment under the IRS 60/40 rule.
Stocks held longer than one year qualify for favorable capital gains
tax treatment, while stocks held one year or less are taxed at ordinary
income.
However, proceeds from index futures contracts traded in the short
term are taxed 60 percent at the favorable capital gains rate, and only
40 percent as ordinary income.
Also, losses on NASDAQ futures can be carried back up to 3 years, and
tax reporting is significantly simpler, as they qualify as Section 1256 Contracts.