If you are going to be involved in Nasdaq futures contracts and don’t know the contracts, then you are at the right place.
A “futures contract” is a legal document between two parties. In the contract, one party will pay the dues of the other party from the starting date to the expiry date. In a trading contract, traders lock in the price of an asset. They agree on the expiry date and prices. Some multipliers are set to increase the value of leverage. Traders can set the contract for a long or short term or stick to the rules. There are different types of contracts, i.e., equities, currencies, and indexes.
Index of Futures Contracts
An index future contract is an agreement between two parties on legal documents. The contractor can buy the indexes and pay for them in the future. It allows traders to lock in the price of indexes. The Nasdaq 100 also offers index future contracts.
Traders track the price of their assets. The index determines the price of a stock. Nasdaq calculates the prices of stock that are used in 100 different companies related to Nasdaq. DOW and Globex Nasdaq calculate the price of their stock. Each company will trade on the exchanges.
Contract Multipliers
The index contract multiplier calculates the index price in dollars when there is a change in the value of the index. The multiplier for DOW is 5, so each contract value is $5. In the same way, the multiplier for Nasdaq is 20. It means the contract value of each contract is $20. The value of each contract in SP-500 is 50 points. That is why each contract value is $50. If the points of the Dow fall 100 points, then the seller will gain a profit of $500, and the buyer’s loss is $500.
The thing to keep in mind is that higher contracts are not always associated with higher risk. This is because the index value can be changed. For example, if the Nasdaq closed at 9,555.52 on April 30 and the Dow ended at 25,383.11. As you can see, the prices of each index have increased, so the value of the Nasdaq contract is $1,911, and the Dow value is $1,269. The volatility of the index can also increase or decrease risk.
The broker can see the change in value at the end of each day until the contract expires. That is why if Nasdaq loses 50 points, $250 will be deducted from the buyer’s account, and the same amount will be added to the seller’s account.
E-Mini Contracts
The future contracts for the Nasdaq 100 are performed on CME Globex. The Globex Nasdaq is called the e-mini contract. A contract’s lifetime is three months, but it can be updated four times in one year.
It trades for six days a week, i.e., from Sunday evening to Friday afternoon. Traders can perform trading every day of the week. Between the close of the U.S. equity market and the opening of the European stock exchanges in the early morning hours, liquidity tends to dwindle significantly. Spreads and volatility might expand during these periods, increasing the transaction costs of new holdings by a large amount.
But if the Nasdaq future contract starts trading before the trading time of the U.S. stock market, Then the value of the index will change according to the trading hours of the stock market, and it will show expected prices in the future but not the current price.
Final words
The Nasdaq future contract allows its traders to trade in the market and lock at the prices of indexes. So traders can discover the future of Nasdaq without paying.