Trading of futures has become one of the most liquid markets where institutional and retail investors are willing to make a bet on, or hedge against, the direction of the equity markets. The Nasdaq-100 index contracts, a measure comprising some of the largest growth and technology stocks traded on the U.S., are among the most actively traded of these futures. Some of the most actively traded contracts that are tied to this index include the standard Nasdaq futures and Micro Nasdaq futures. They both have exposure to the same underlying index but differ in design for traders with varying profiles. One of the quite basic factors that determine trading strategy, liquidity, and participation is trading hours. In order to successfully time and risk manage, and finally trade profitably, one must know that Nasdaq futures hours differ from Micro Nasdaq futures.
Finding Nasdaq Futures
Nasdaq futures are the full-size Nasdaq-100 index futures contracts. These contracts are most sought by professional traders, the majority of whom are most in demand by fund managers, and institutional traders who need large position sizes, and more exposure to market action. Each Nasdaq futures contract has a multiplier, making it extremely pricey per index point, i.e., slight price movements can lead to humongous profits or losses. These are traded on the Globex platform of CME Group and are cash-settled, therefore flexible and transparent. Due to their liquidity and size, Nasdaq futures are suitable for individuals with more capital and expertise in handling volatility.
What Are Micro Nasdaq Futures?
Micro Nasdaq futures are the reduced-size version of the regular Nasdaq futures contract. Designed to facilitate retail traders and smaller account customers, Micro contracts offer the same exposure to the Nasdaq-100 index but in one-tenth of the size of the regular full futures contract. Through this reduced contract size, traders can trade with less capital investment, cutting the complexity of dealing with risk management and finding the futures trading in a real-time scenario. Micro contracts also exchange electronically on CME Globex but capture the full-size counterparts' price action and settlement cycle with lower financial exposure.
Normal Nasdaq Futures Trading Hours
Regular Nasdaq futures trading hours span virtually 24 hours a day, five days a week. It opens for trading on Sunday evening and continues straight through to Friday evening with barely a break at all. Official trading sessions are from 6:00 p.m. to close at 5:00 p.m. Eastern Time (ET) every day except for one hour of 5:00 to 6:00 p.m. ET. This virtually open trading window enables global participation and the capacity to respond to global news and events around the clock. It is particularly helpful with overnight trading sessions when global markets affect U.S. indices. Due to this extended session, investors can actively hedge positions, put on stop-loss orders, or make changes in strategy after closing hours.
Micro Nasdaq Futures Trade Schedule
Micro Nasdaq futures share the same trade schedule as regular Nasdaq futures. They are traded between 6:00 p.m. ET Sunday through Friday until 5:00 p.m. ET, with the same one-hour maintenance window on a daily basis. This simultaneous format is intentional and provides ready access to all traders, both large and small contracts. The simultaneous times provide an easy means for Micro Nasdaq futures to react to market actions simultaneously that regular contracts do, resulting in price coordination and simple hedging, diversification, or strategy scaling. Small account traders are assisted by the fact that they can trade the markets simultaneously with the institutions.
Trading Hours and Liquidity Differences
Although Micro Nasdaq futures and regular futures both trade within the same trading session, liquidity varies depending on the day part and contract size. During United States regular market hours, typically 9:30 a.m. to 4:00 p.m. ET—the two contracts are highly liquid, with narrow bid-offer spreads and a deep book of orders. However, regular contracts are more attractive to volume and institutions, especially beyond normal trading hours. Micro Nasdaq futures might have thinner order books and wider spreads during quieter days, i.e., morning and evening sessions. Due to this reason, timing is a crucial factor for Micro futures traders, particularly those with small stop-loss levels.
Benefits of Extended Trading Hours
Extended trading hours of Nasdaq and Micro Nasdaq futures offer a multitude of benefits to the trader. To begin with, they enable participants to respond to news and economic information available outside regular time of the U.S. stock market. Whatever occurs in Europe or Asia can shift futures prices a long way, and around-the-clock trading implies that one is never caught off guard. Swing trading, position management, and even intraday trades during off times are also possible overnight. Last of all, extra time to trade provides extra flexibility for foreign traders trading outside standard major time zones so more of the globe can buy in.
When Are the Most Active Times of Trading?
Although Nasdaq futures themselves are accessible nearly 24/5, their most active time of trading actually lies within US standard stock market times. Volume and volatility are highest during 9:30 a.m. to 4:00 p.m. ET, where there is highest earnings news, economic report news, and major news events. The prior open market session (8:30 a.m. to 9:30 a.m.) and follow-on close market session (4:00 p.m. to 5:00 p.m.) are also typically more liquid. While Micro Nasdaq futures may be traded at these times, retail traders will see higher slippage or even higher spreads during non-business hours.
Between the Two during Time of Trading
For those who work day jobs or have daytime work schedules, Micro Nasdaq futures could be a less stressful way of getting into the futures market because their size is so tiny and the same longer durations of trade. For the more experienced and better-capitalized, however, the standard Nasdaq futures could be the better choice with more liquidity and more price action per point. Your choice of product may also be influenced by when you trade. If you will be trading based on overnight or pre-market activity, be sure that you are comfortable with your contract's liquidity profile during these times.
Final Thoughts
Both Nasdaq futures and Micro Nasdaq futures are great vehicles on which to hedge or speculate against action in the Nasdaq-100 index. Although both trade the same hours, theoretically 24 hours a day, five days a week, they are geared toward traders with different amounts of capital and different appetites for risk. Knowing how the trading hours align with liquidity, volatility, and executing the strategy is key in choosing the proper product. Whether the full-size or the micro contract, knowing when and how to become active with the market can be extremely effective in your trading performance.