NAS100 or Nasdaq100 is an Equity Index of the largest 100 non-financial companies. It's a barometer of the US economy and represents the health of IT companies. NAS100 was formed on 31st January 1985 and shot to fame during the dot com revolution. To assess the Financial Firms there is a Nasdaq Financial-100. This index has seen the rise of the US as Super Power in the world, 2000 IT recession, Housing Bubble, 9/11 attack and subsequent wars in the Middle East, Russia/Ukraine conflicts and change of US presidents.
Most of the Prop Trading Firms have an Instrument to trade for NAS100. It's a popular instrument to trade. There are a lot of reasons and key points that a Prop Trader should look at while trading the index.
Impact of Economic Events
The index’s performance is a lot impacted by the economic events. Since its a composite of firms from technology, manufacturing, infrastructure companies, etc any news or an event that has a significant bearing on the performance of the business cycle will impact the listed prices and in turn the Index numbers.
US Dollar Performance
US companies get most impacted with a strong dollar rate and in turn move the share prices upwards. There has been great focus on the dollar rate recently to help it further improve its global benchmarking as the most preferred currency for trading.
Fed Interest Rates
Fed Interest rates have had an impact on the consumption cycle of the economy, it leads the way to the leading and borrowing outcome for banks and balance sheets of the companies. Hence a low interest rate regime shall help the companies borrow at lower rates and manage the profit margins. This paves way for the stock price impact and moves the index significantly.
Companies Financial Performance
There is a direct correlation between the company’s performance and its stock price. Traders need to keep a close eye on the companies' financial performance that are a part of the NAS100 Index. A way to track the performance is by keeping an eye on the economic calendar that impacts the prices.
Diversification and Hedging Option
Many skilled funded traders use the NAS100 to diversify the portfolio and at times use it as a hedge option to prevent the equity level in case the market is volatile. Being an index it is built of different sectors and goes through the ups and downs of business cycles, hence insulating against the market price movements. This is a prime reason why the NAS100 is a popular index with Traders.
Track changes in the NAS100 Structure
As a practice, keep track of any changes in the companies that are part of the NAS100 Index. This shall help to analyse the price levels and tracking of the events that shall impact the profitability of firms. This will be another key decision point at what levels to enter into a contract or plan for an exit.
Conclusions
NAS100 is a globally recognized performance index for non financial firms. This index is a benchmark for many other index performances. The point is that any company needs to pass through very selective criteria to be a part of the NAS100 to ensure the quality of outcome. The index number is a very true and fair assessment of the business conditions. It's a moment of pride for any firm to be listed in this index. To trade effectively in the long term, it's essential to continuously learn about these firms' business models and assess their future prospects.
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