Micro E-mini Nasdaq-100 contract provides exposure to the largest non-financial companies in the Nasdaq stock market
Futures can offer the potential to gain macroeconomic exposure to equity indexes in a cost effective way
Micro E-mini Nasdaq-100 contract provides exposure to
the largest non-financial companies in the Nasdaq stock market
Earnings season is upon us! As the markets score fresh all-time highs, investors will be closely watching whether this year’s strongest sector, technology, can continue its 30% YTD run. More importantly, the FAANG stocks (Facebook, Apple, Amazon, Netflix, Alphabet) have failed to keep pace, causing some investors to question whether the rally will continue. It’s understandable that they closely watch their quarterly results, given their collective market cap is over $3.4 trillion, meaning these large cap, high beta names have the potential to jar the broader market.
If you’re looking to gain exposure to this group of stocks or the technology sector in general without taking a position in each company, futures can offer the potential to gain macroeconomic exposure to equity indexes in a cost effective way. Whether you’re new to futures and are looking to test the waters or you’re a veteran trader, the CME’s recent launch of its Micro E-mini futures contracts, which are 1/10th the size of the traditional E-mini contracts, is tantalizing. One of those products is the Micro E-mini Nasdaq-100 contract which provides exposure to the largest non-financial companies in the Nasdaq stock market.
In its latest quarterly results, Netflix reported much weaker than expected subscriptions, and the stock cratered 11% in response. The Micro E-mini Nasdaq-100 fell right alongside it, as well as both Amazon (AMZN) and Alphabet (GOOGL), given their high correlations to one another. Alphabet (GOOGL) shares soared more than 9% in post-market trade following a quarterly report that beat on the top and bottom lines while Amazon (AMZN) was off 1.5% as profit missed consensus. The Micro E-mini Nasdaq-100 rallied on the positive report from Alphabet (See Figure 1).
FIGURE 1: COMPARISON CHART. Comparison chart of /MNQ and GOOGL highlighting moves when GOOGL reported earnings on July 25, 2019. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
Apple (AAPL), one of the most widely traded stocks at TD Ameritrade and the second largest Nasdaq-100 company, reports Q3 results on July 30, 2019, after market close. Keep an eye on how the Micro E-mini Nasdaq-100 contract responds to the earnings release as it has historically caused rocky oscillations in the index. The Micro E-mini Nasdaq-100 contract also allows investors to effectively hedge a portfolio of heavily weighted technology companies. This offers the potential to minimize risk during earnings season while only using a relatively small amount of capital. The smaller size contract may potentially create opportunities for investors or traders with smaller portfolios or provide granularity in hedging a larger one.
Available virtually 24 hours a day, 6 days a week, the Micro E-mini Nasdaq-100 has ample liquidity around the clock which is especially useful as most companies release their earnings before or after U.S. equity market hours.
Watch this short video on Micro E-mini Future Contracts to learn more:
Additional Resources on TD Ameritrade Network:
CME Launches Micro E-Minis Equity Index Futures
TD Ameritrade offers a broad array of futures trading tools and resources. Access more than 70 futures products virtually 24 hours a day, six days a week.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Futures and futures options trading is speculative, and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products.
Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC).
Futures and futures options trading services provided by TD Ameritrade Futures & Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.
Leverage carries a high level of risk and is not suitable for all investors. Greater leverage creates greater losses in the event of adverse market movements.
Be mindful that futures contract margin requirements vary for each product, and they can change at any time based on market conditions. TDAFF reserves the right to increase margins at any time without notice.
The securities shown are for illustrative purposes only and not a recommendation to buy, sell or hold any security.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.