The Most Liquid Index
Index options are a great way to trade. They allow
you to place trades based on the movement of a basket of stocks, which has
advantages compared to selecting and trading numerous individual stocks. In
addition, index options are highly liquid trading vehicles.
One popular index option is the option on the
NASDAQ-100 Index (NDX).
NASDAQ-100 Index options allow you to
speculate on the future direction of the Nasdaq-100 Index. With NDX, you
trade an option on the underlying basket of stocks that represented in the
NASDAQ 100 index. The NASDAQ-100 Index comprises the largest non-financial
companies listed on the NASDAQ stock market. Most of the 100 issues are well
known companies, such as Microsoft, Qualcomm, Intel, and Cisco Systems.
Another index with high liquidity is the
S&P 100 (OEX).
OEX options allow you to speculate on the movement of the S&P 100
Index. The OEX consists of 100 blue-chip stocks from diverse industry groups
- they provide a good measure of the market's overall performance.
S&P 500 (SPX) Index options are among the most
highly liquid options on the market. The S&P 500 Index is comprised of 500
leading companies (most of them listed on the NYSE) from a diverse array of
Dow Jones Industrial Average Index options (DJX)
enable you to speculate on the future direction of the Dow. Since their
introduction in 1997, DJX Index options have grown to become one of the most
popular index options. DJX options are also a highly liquid trading vehicle.
QQQQ options are options on the NASDAQ-100 Index
Tracking Stock and have become very popular in recent years. QQQQ options
are the most liquid option currently traded on the market. The QQQQ, also
known as the "cubes" (or ï¿½qubesï¿½), are an example of an exchange-traded
fund (ETF). ETFs track major stock indexes and can be traded just like a
regular stock. The QQQQ track the NASDAQ-100 Index, which consists of 100 of
the biggest and most important stocks of the NASDAQ Composite Index.
Above we discussed the most liquid index options available
today. High liquidity means you can easily get in and out of a position.
Other index options are available; however, most do not provide the same
degree of liquidity as the ones discussed. If you feel you would rather
speculate on the general direction of a basket of stocks (i.e., an
underlying index) than analyze a number of individual stocks, then trading
index options might just be for you.
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