What is Nasdaq 100 and how it works

The NASDAQ 100 (NAS100) stock index is one of the largest and most famous in the world. Home to US companies with the largest capitalizations and growth prospects, including Apple, Microsoft and Alphabet, the NASDAQ 100 is naturally a gauge of US technology sector sentiment and growth stocks in general.

If you are an aspiring investor looking to trade indices or CFDs (contracts for difference) in one of the fastest growing and most exciting global markets, the NASDAQ 100 is a potentially lucrative choice.

In this guide, you will discover the basics of the index, the factors that determine price movements, the benefits of trading and strategies for trading the NASDAQ 100 in order to obtain positive results.

What is the NASDAQ 100?

The NASDAQ 100 is a stock index comprising the 100 most actively traded companies listed on the New York NASDAQ (National Association of Securities Dealers Automated Quotations). The index has a market capitalization of just under $17 trillion as of April 2022 and has a base value of 125.

Which companies are in the NASDAQ 100?

To be included in the NASDAQ 100, companies must meet NASDAQ’s initial listing criteria, the most important of which are:

Have been listed on the NASDAQ stock exchange in the Global Market or Global Select levels

Have been listed on the stock exchange for at least three months

An average daily volume of 200,000 shares

No bankruptcy proceedings in progress

Submission of quarterly and annual financial reports.

The NASDAQ 100 includes companies from several sectors – consumer, industrial, telecommunications, healthcare and others – but is dominated by technology companies. These comprised just under 60% of the index in May 2020. Financial companies are not featured, but are featured in the NASDAQ Financial-100 index.

What does the NASDAQ 100 measure?

The NASDAQ 100 measures the movements in the total value of the shares of the 100 companies that compose it.

The increase or decrease in the share prices of the companies that make up the index is reflected in the index itself. However, given the number of companies that make up the NASDAQ 100, increases and decreases are perceived at the macro level, making the index likely to change in line with broader shifts in market sentiment.

How often does the NASDAQ 100 change?

The NASDAQ 100 changes annually in December, as well as potential quarterly rebalancing in March, June and September. This is in addition to the regular removal of companies due to mergers and acquisitions, bankruptcy proceedings, failure to meet listing criteria and transfers to other exchanges.

Every December, the NASDAQ analyzes companies in and out of the index. Based on a comparison of share prices to publicly announced share totals, companies are eliminated if they do not meet the criteria or if they are overtaken by a non-index company that takes over from the previous organization . This ensures that the constituents of the NASDAQ 100 are high-growth, large-cap companies.

Quarterly deletions and additions may occur if:

the value of a company is equal to or greater than 24% of the total index

companies with a weight of at least 4.5% make up 48% or more of the index.

A December annual rebalance can occur after a quarterly rebalance if:

the value of a single company exceeds 15% of the total index

the top five companies by market capitalization make up 40% or more of the index.

Brief history of the NASDAQ 100

Launched on January 31, 1985, the NASDAQ 100 was the world’s first electronic exchange, designed as a tool to support derivatives such as futures and options.

After explosive growth in the 1990s, it was hit hardest after the 2000 dotcom bubble and again in the wake of the 2008 global financial crisis. However, as US technology companies have risen and matured, the index experienced significant price increases of more than 700% between 2012 and 2022.

Today, the index is home to the world’s most established technology companies, as well as new technology companies such as Airbnb, Netflix and Tesla.

What are the NASDAQ 100 trading hours?

Trading hours for the NASDAQ 100 are 9:30am to 4pm Eastern Time, Monday through Friday. Pre-market and post-market trading sessions run from 4am to 9.30am and 4pm to 8pm respectively (these times may vary between brokers).