The US Tech 100 index is a popular choice for spread betting and contracts for difference. It is basically the NASDAQ market, and if you know about the arrangement of the US markets, you will know that the NASDAQ is a hi-tech market, with the famous “Silicon Valley” type companies that specialise in electronics, computing, aerospace, etc.
The NASDAQ market was started in 1971, and was the first electronic “stock exchange” – there never was a physical exchange building. The US Tech 100 or NASDAQ 100 index came along in 1982, when as is common with indices it was set to a notional starting value from which it has progressed.
Unlike a conventional stock exchange, where a listed company will usually have a specialist assigned to control the trading, because of the way it works there is no one person assigned to “make the market” in the stocks. Instead, there are several market makers who each handle several offerings. For the spread trader this will not normally make a difference to the pricing, as you are not dealing with the market makers but with the spread betting company, who is “making the market” in spread betting for you.
The US Tech 100 is an index that is price weighted. Being a US based index, it will be affected by the general news flow for North America, including unemployment, non-farm payroll, and interest rate announcements. The President’s speeches should also be followed for any changes to taxes or incentives, particularly in the field of energy efficiency and alternative energy which are hot topics at the moment.
As a hi-tech index, you can be on the lookout for technological improvements and offerings to see what might give it a boost. Typically a new type of product will lift the index in general, and individual products such as the latest Apple I-phone will have an effect. There is often a bump around Christmas time because of all the gadgets being bought for gifts.
Some people will try to tell you that the US Tech 100 index is a mild mannered index, and not too volatile. That may apply at times, but is not guaranteed. For instance, at the start of the century there was a terrible bubble in hi-tech, and the index took a hammering. And just recently with the economic meltdown, the index has not been quiet. In the last three years it has ranged from just over 1000 to nearly 2500.
This can be good news for the spread better who is prepared to put some effort into betting. Volatility is synonymous with profit opportunities even while it is something to watch out for in terms of risk. The general guidelines still apply – that you should have a trading plan or strategy worked out and preferably back tested in advance to make sure that the technical indicators that you have chosen will work well with the index. The plan must include firm guidelines on where to exit a losing bet so that you are not tempted to “wait and see” if it reverses, and possibly suffer a large loss.
US Tech 100 Spreads: NASDAQ Index Spread Betting
It can be exciting to spread bet on the US Tech 100, as it seems most days there are more announcements of developments in technology which inevitably become reflected in the index. If you want to stay in touch with the market, you must commit time to reading all about these.
The current rolling daily quote for the US Tech 100 index is 2335.1 – 2336.1. You decide that the index should be going up, and place a long bet at 2336.1 for a total of £6 per point.
When the index goes up, you decide to take your profit when it reaches a quote of 2387.3 – 2388.3, and you close your bet at a price of 2387.3.
You want to figure out how much you have won. It is quite easy to calculate.
You bet £6 per point, which is what you get for each point that the index went in your direction.
Your bet closed at a price of 2387.3, and the starting price was 2336.1.
Therefore the number of points that it moved was 2387.3-2336.1, which is 51.2 points.
Multiplying that times your stake, you get total winnings of £307.20.
One of the dangers with trading is that the market will often go in the opposite direction to the way you want it to go. Say in this case the index actually fell in value, you might decide to cut your losses and close your bet anyway, and you do this when the price quoted is 2321.2 – 2322.2. Your bet closes at a price of 2321.2, and you work out how much you lost.
Your stake remains the same, at £6 per point, and this is what you lose for each point that the index went against you.
Your bet closed at a price of 2321.2, and started at 2336.1, which means you lost 14.9 points.
Taking your stake into account, your total loss is £89.40.
Your spread betting company may also quote for future based spread bets. In this case, the quotation is 2325.1 – 2329.1. You can see that the spread is larger, at four points, and that is a reflection of the fact that you do not roll it over every day, incurring interest charges.
Suppose you feel that the US Tech 100 is going down in the next few weeks, you might place a “sell” bet at 2325.1 for £12 per point.
If the quote for the spread bets falls to 2286.3 – 2290.3, you could close the bet for a profit. You do not have to wait until the future date. Closing the bet at 2290.3, the total number of points that you would have gained (remembering that you bet on the index going down) would be 2325.1-2290.3, which is 34.8. At a stake of £12 per point, this means that you won £417.60.
Of course, the index might have gone against you. When it reached 2336.5 – 2340.5, you decided to close your short bet and suffer a small loss.
The number of points you lost is 2340.5-2325.1, which is 15.4. For the same stake this works out to a total loss of £184.80.