Trading Techniques  |  MAR 2003

Daytrading QQQ by Misha T. Sarkovich, Ph.D.

Daytrading QQQ by Misha T. Sarkovich, Ph.D. Looking at price history can help you become a more successful trader. The QQQ is an exchange-traded fund (ETF), sometimes referred to as “cubes” or “Qs.” The QQQ is traded primarily on the exchange floor of the American Stock Exchange (AMEX) and represents a price index of Nasdaq 100’s largest stocks. In essence, the QQQ allows investors and traders to buy or sell shares in the collective stock performance of an entire stock portfolio as a single security. Other common exchange-traded funds are SPY and DIA, which are also referred to as “spiders” and “diamonds.” These represent the price indexes of the Standard & Poor’s 500 index and the Dow Jones industrials, respectively. THE BASICS QQQs, SPYs, and DIAs are ETFs that are unit investment trustsÝ governed by the Investment Company Act of 1940, while iShares and Select Sector SPDRs are structured as open-end mutual funds or managed investment companies. ETFs must replicate the holdings of the underlying index. Subsequently, the ETFs are continuously created and redeemed by large financial institutions (that is, the authorized participants) in large block units of 50,000 shares to reflect the actual buying and selling of ETF shares. In addition, ETFs are held only in the book entry format, without any traditional stock certificates.

by Misha T. Sarkovich, Ph.D.