Exchange Traded Funds (ETFs)
The NASDAQ 100 Index (^NDX) consists of 100 of the largest public companies that are listed and traded on the NASDAQ Market. The Powershares QQQQ (old name QQQ) is an Exchange Traded Fund (ETF) that tracks the performance of the NASDAQ 100 Index. The NASDAQ 100 index is based on the market capitalization of 100 of the largest domestic and international non-financial companies, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology companies. The NASDAQ 100 index was launched in January 1985. The Powershares QQQQ were introduced and began to trade on March 10, 1999.
The QQQ stock is also known as "Qubes" and was previously traded on the Amex Stock Exchange under the QQQ symbol. On December 1, 2004, QQQ was moved to the NASDAQ Stock Market Exchange and was assigned a new ticket: QQQQ.
The QQQQ is designed to follow the performance of the NASDAQ 100 Index. Its price is calculated as 1/40th of the index price. Still, QQQQ does not always match 1/40 of the NASDAQ 100 Index. The difference in price could be explained by the fact that, in keeping with market rules, the index stops trading at 16:00 EST, although stocks still can be traded during the after-market-close hours. If QQQQ stocks move up by 0.2% after the market closes, we may see on the next trading day that the NASDAQ 100 price change differs from the QQQQ price change by 0.2%.
The QQQQ stock is one of the most liquid and most actively traded stocks. There are several reasons why this trading vehicle attracts investors and speculators:
- Like stocks, the QQQ shares (although QQQQ is a fund) can be traded as stocks and can be bought on margin and can be sold short. In contrast to regular funds, a trader can use them to trade Bull and Bear markets.
- The Powershares QQQQ can never become worthless. Their price cannot drop to zero simply because the index cannot fall to zero. The indexes are reviewed on a regular basis and the bad stocks are removed from the index's list.
- The QQQ stock attempts to correspond to the NASDAQ 100 index trend. It gives a great ability to investors to invest in 100 companies by buying a single stock (by conducting only one transaction).
- Since the QQQ stock is one of the most active stocks in the U.S. market, it enables an investor to easily open and close positions at any time during trading hours.
- As with a majority of stocks, speculators may trade options on the QQQQ.
- The NASDAQ 100 index technical analysis can be used to trade QQQ, build a trading system or develop a trading strategy for this stock.
- Fundamental analysis is not essential for trading QQQ. The NASDAQ Stock Market does this complicated analysis, instead of traders, by reviewing the listed companies, removing weak ones and including strong ones.
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