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Options on Nasdaq 100® Index Options - NDX, MNX & QQQ

Options on Nasdaq 100 Index Options - NDX   Options on Nasdaq 100 Index Options - MNX   Options on Nasdaq 100 Index Options - QQQ

The introduction of the Nasdaq-100 Index Tracking Stock (often referred to as QQQ) allows investors to purchase a share of stock in order to invest in the largest and most actively traded companies on The Nasdaq Stock Market-the companies of the Nasdaq-100 Index. Nasdaq-100 Index Tracking Stock now trades under the ticker symbol "QQQQ." With Nasdaq-100 Index Tracking Stock, you can buy or sell shares in the collective performance of the Nasdaq-100 Index in a single transaction - just as you buy or sell shares of individual stocks. It's a one-investment portfolio that gives you ownership in the 100 stocks of the Nasdaq-100 Index. And because Nasdaq-100 Index Tracking Stock trades like stock, you can buy them on margin, sell short or hold your shares for the long term. When you purchase Nasdaq-100 Index Tracking Stock, you're investing in the Nasdaq-100 Trust, a unit investment trust that holds shares of the companies in the Nasdaq-100 Index. The Trust is designed to closely track the price and yield performance of the Index - so you can expect your Nasdaq-100 Index Tracking Stock to move up or down in value when the Index moves up or down.

The initial market value of QQQ generally approximates 1/40 the value of the underlying Nasdaq-100 (NDX) Index. So for example, if the NDX price level is 1400, the QQQs generally would be expected to be priced around $35. QQQs may be bought and sold at intraday prices throughout the trading day - something you can't do with conventional index mutual funds that are generally purchased or redeemed only at an end-of-day closing price related to net asset value. The pricing of Nasdaq-100 Index Tracking Stock is continuous, subject to any trading halts, during exchange trading hours. The portfolio of Nasdaq-100 Index stocks held by the Nasdaq-100 Trust is passively (not actively) managed, which means the Trust does not try to outperform the Nasdaq-100 Index, just track it closely. And because this tracking requires less costly trading and less portfolio turnover than actively managed portfolios, costs on Nasdaq-100 Index Tracking Stock should be lower than on conventional funds that are actively managed.

Because the Nasdaq-100 Trust portfolio is designed to closely track the Nasdaq-100 Index, it is less likely than actively managed portfolios to experience the trading of securities, which can create potentially high capital gains distributions. The Nasdaq-100 Trust will generally only sell securities to reflect changes in the composition of the Index and to pay Trust expenses. In addition, since Nasdaq-100 Index Tracking Stock is sold through exchange trading, they also will generally not require the sale of stocks and generation of capital gains that is required by conventional index funds in effecting cash redemptions.

An investment in QQQs should be made with an understanding that the Nasdaq-100 Trust will not be able to replicate exactly the performance of the Index because the total return generated by the securities held in the Trust will be reduced by transaction costs incurred in adjusting the actual balance of the securities and other Trust expenses, whereas such transaction costs and expenses are not included in the calculation of the Index. It is also possible that for short periods of time, the Trust may not fully replicate the performance of the Index due to the temporary unavailability of certain Index securities in the secondary market or due to other extraordinary circumstances. Such events are unlikely to continue for an extended period of time because the trustee of the Trust is required to correct such imbalances by means of adjusting the composition of the Trust.

Before investing in QQQs, you should read the Nasdaq-100 (QQQ) Prospectus.

For more on QQQ options strategies, click on one of the two examples below.

QQQ Covered Write I.1

QQQ Collar P.3

Options involve risk and are not suitable for all investors. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606. The information in these materials is provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions which should be referred to for additional detail and are subject to changes that may not be reflected in these materials. No statement within these materials should be construed as a recommendation to buy or sell a security or to provide investment advice. Any strategies discussed, including examples, do not include commissions, dividends, margin, taxes, and other transaction costs. However, these costs will affect the outcome of transactions and should be considered. S&P 100 and S&P 500 are registered trademarks of the McGraw-Hill Companies, Inc., and are licensed for use by the Chicago Board Options Exchange, Inc. (CBOE). The "Russell 2000 Index" is a registered trademark of Frank Russell Company. The Nasdaq 100 is a registered mark of The Nasdaq Stock Market, Inc. "Dow JonesSM", "Dow Jones Industrial AverageSM", "Dow Jones Transportation AverageSM", and "Dow Jones Utility AverageSM" are service marks of Dow Jones & Company, Inc. and have been licensed for certain purposes by the CBOE. LEAPS, FLEX, FLexible EXchange, CBOE, Chicago Board Options Exchange and OEX are registered trademarks of CBOE, and Long-term Equity AnticiPation SecuritiesTM and SPXTMare trademarks of the CBOE.

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