The NAS100 is a predominantly US equity index composed of the largest stocks listed on the NASDAQ stock exchange, excluding financials.
The 100 largest financial stocks make up a separate index, the NASDAQ Financial 100.
Depending on your brokerage platform the NASDAQ-100 index may also appear as NAS100, NDX100 or similar.
As the index is predominantly made up of big USD tech stocks, you may also hear it referred to in trade media as the US Tech 100.
The NASDAQ Composite on the other hand is an Index featuring all NASDAQ exchange securities, not just the top 100 non-financial stocks, if you hear the financial news media mention the NASDAQ without any qualifier, they are likely talking about the composite index.
The NASDAQ exchange
The NASDAQ exchange is one of the largest in the world, actively competing with the largest and centuries-old New NYSE or New York Stock Exchange.
The exchange launched in the 1970s and got its name from the National Association of Securities Dealers (NASD) who founded the exchange.
The exchange was taken public in 2006 and though the NASD no longer held any stake following the public offering, it was logical to stick with the NASDAQ name and brand that had been built in the minds of the American investing public over the past 30 years.
Following their divestment from the NASDAQ exchange, the NASD morphed into FINRA – the Financial Industry Regulatory Authority.
When the NASDAQ exchange first launched as the world’s first electronic exchange, it was actually only just a price feed with no trade execution functionality.
Eventually, trade execution functionality was implemented and this was the first step towards the digital execution we know today.
In fact, the NASDAQ was actually the first exchange to take trading online to the world wide web.
NDX100 index launches
The NDX100 index launched in 1985 as a competitor to the S&P500 index made up of NYSE stocks. The creation of the index allowed for third parties to create futures and other derivatives markets based on the index which further contributed to the new product’s success over the coming years.
Being largely composed of tech stocks, the index was well-positioned for the Dot Com bubble at the turn of the millennium but also fell victim to the associated pop. Even so, the index eventually recovered from this crash and the crash of 2008 and has delivered exceptional annual returns to investors over the past 50 years.
Makeup of the NAS100 index
Though the NAS100 was originally just 100 stocks, some companies have A & B class shares listed so there are now 102. From Google to Amazon, the index is jam-packed with the biggest names in US tech, with a few foreign domiciled companies as well. Having said that, the index is still quite diverse with a range of big players in other sectors beyond tech also featured.
Severely underperforming components can drop out of the index at any time and an annual review is also conducted, ensuring that each year only the top 100 NASDAQ stocks by market cap are featured in the index.
All of the world’s stock markets trend upwards over time and the NDX is no different.
As such, buy-side only strategies are very popular and a great place to start for new traders whether discretionary or systematic.
Some of the most successful and proven strategies are trend-following strategies which ride multi-year bull markets and sit out temporary weakness.
A trend-following strategy like this can generate incredible risk-adjusted returns, capturing the majority of upside potential whilst missing out on the majority of weakness.
Once you’ve perfected a buy-side only trend strategy, you could explore incorporating shorting into the strategy to capitalize on bearish price actions, whether trends or on shorter horizons.
If you’re unsure where to start, daily moving average crosses may be worth exploring and daily strategies work especially well for traders with limited time, as you do not need to spend your entire day looking at charts, you simply either take a trade, close a trade or do nothing at the start of a new trading day.
Trading the NAS100 from South Africa
Though the NAS100 is one of the most actively traded equity indexes in the world, it can be a little difficult to trade the cash market directly from South Africa, especially if you don’t have the required capital to trade with a US brokerage.
Thankfully South Africa has a range of foreign exchange and Contract for Difference (CFD) brokers that allow local traders to speculate on US Tech stocks via the NAS100 CFD.
CFDs are a really great option for new traders as the fees are extremely competitive and CFD brokers will offer their clients significant leverage despite very simple and fast-tracked account opening procedures.
Leverage magnifies gains and losses but can be an extremely powerful tool in the hands of an educated trader, allowing you to generate risk-adjusted returns well beyond a simple buy-and-hold investing strategy.
South African CFD brokers will allow you to start investing and trading the NAS100 with a minimal amount of initial capital so this is a really good option if you’re just starting out trading US indices.
If you’re looking to trade NAS100s with a reputable South African CFD broker, look no further than Blackstone Futures. Experience tight spreads from 1 point, no commissions!
Open a live account with a reputable South African broker today and catch the next big trend in big tech.