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Top 3 Advantages of Trading E-mini NASDAQ Futures

, | March 8, 2024 | By

For more than two decades, technology has been a key player in the world of finance. From the dot-com crash of the early 2000s to the meteoric rise of FAANG stocks, big tech is never far from Wall Street’s collective psyche. This year has reminded us of the sector’s importance: As COVID-19 decimates markets in 2020, tech values are outperforming those of almost all traditional industrial titans.

E-mini NASDAQ futures furnish active traders with the leverage, liquidity, and volatility that have made derivatives famous. In addition to these key benefits, this contract provides traders three primary advantages for navigating the contemporary marketplace.

1. Technology Focus

Established in 1971, the National Association of Securities Dealers Automated Quotation System (NASDAQ) is an exclusively electronic equities marketplace. Over time, the NASDAQ has become the second-largest stock exchange in the world, carrying a market cap north of US$28 trillion.

The E-mini NASDAQ mirrors the performance of the exchange’s elite offerings, the NASDAQ-100 Index. Given the exchange’s featured listings, E-mini NASDAQ futures are a great way to engage the best of the tech sector. Here are a few of the most prominent technology-based companies included in the index:

  • Amazon.com Inc.
  • Alphabet Classes A, C (Google)
  • Microsoft Corp.
  • Netflix Inc.
  • Booking Holdings Inc.
  • Tesla Inc.

Lower fees and an extended online presence attract companies from diverse sectors to list on the NASDAQ. Nonetheless, the primary component of the NASDAQ-100 continues to be technology’s household names. If you’re an active trader looking to gain exposure to the growth potential of big tech, E-mini NASDAQ futures are an investment worth considering.

2. Volatility

The vast majority of stocks offered on the NASDAQ are considered to be “growth” stocks. A growth stock is one projected to significantly outperform the broader market average. The NASDAQ-100 features several high-profile growth shares, specifically Amazon, Facebook, and Tesla.

Of course, with growth comes volatility. And, because E-mini NASDAQ futures are a leveraged product, the volatility exhibited by the NASDAQ is magnified. This aspect of market behavior can be a tremendous advantage for hedgers and speculators alike.

Large swings in asset pricing may produce extraordinary gains or quick rebounds from losses. A prime example of this concept came amid the COVID-19 market panic of spring 2020.

During the peak of COVID-19 financial angst, the NASDAQ-100 proved to be the most resilient of all American stock indices. The index rallied from a March 23 crash-low beneath 7,000.00 to above 10,000.00 on June 10.

For the same period, the September E-mini NASDAQ rose from 6,626.00 to 10,140.00―a staggering uptick of 53 percent. In reality, the dramatic market crash and rebound rewarded both short-term bearish traders and intermediate-term bullish investors.

3. A Chance to Capitalize on the U.S.-China Trade War

Throughout Donald Trump’s first term in the White House, U.S.-China trade has been a hot-button issue. Subsequently, new tariffs, strong rhetoric, and accusations of currency manipulation have all contributed to a hot trade war.

Among the key issues fueling the conflict is intellectual property (IP) theft. This is a key consideration because China has long been accused of massive tech sector corporate espionage. Research from the Center for Strategic and International Studies (CSIS) documents 1,200 cases of IP litigations from U.S. companies against China from 2000-2019. Included in the survey were two prominent NASDAQ-listed firms, Google and CrowdStrike.

Given China’s history of technology theft, any moves designed to boost IP security have brought bids to the NASDAQ-100. A recent example of this phenomenon was the ratification of the U.S.-China phase one trade deal in January 2020. Phase one promoted new guidelines designed to restrict China’s pilfering of intellectual property.

When phase one made headlines, the NASDAQ-100 quickly spiked to all-time highs. Hopes that the added security measures would boost the bottom line for big tech companies drove the strong rally. Subsequently, informed traders capitalized on the development by going long E-mini NASDAQ futures.

Getting Started with E-mini NASDAQ Futures

If you’re interested in the growth potential of NASDAQ-listed stocks, then the E-mini NASDAQ 100 may be just what you’re looking for. To learn more about this exciting contract, contact one of our StoneX brokers today.

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