# Nasdaq-100

Nasdaq-100 is a stock market index of 100 of the largest non-financial companies listed on the Nasdaq Stock Market, weighted by a modified market-capitalization method.

## What it means

The Nasdaq-100 tracks large non-financial companies listed on the Nasdaq Stock Market. It is an **index**, not a stock, an exchange or a portfolio that investors can trade directly. Eligibility and constituent weights follow index rules; the membership and weights can change over time.

The name refers to 100 companies, although the number of securities can differ when a company has more than one eligible share class. It is not a list of the 100 largest US companies across all exchanges, and it excludes financial companies under its eligibility rules.

The index is often used as a benchmark for funds and portfolios. Its modified market-capitalization weighting gives larger companies more influence than smaller ones, subject to index rules that can adjust weights. As a result, an equal-sized percentage move in two constituents need not have an equal effect on the index.

## How it is calculated

An index provider maintains constituent shares, prices, weights and an index divisor. A simplified point-in-time calculation is `Index level = (Σ adjusted constituent market values) / index divisor`, where:

- `Σ` means add across all securities in the index.
- `Adjusted constituent market value` is a security’s price multiplied by the share count used for index calculation, after applicable weighting adjustments; it is measured in US$ when prices are in US$.
- `Index divisor` is a scaling factor, expressed in US$ per index point in this simplified presentation. It helps maintain index continuity when specified changes, such as constituent or share-count changes, occur.
- `Index level` is measured in points, not US$.

This describes the mechanics, not the complete Nasdaq-100 methodology. In particular, modified weighting rules can constrain individual or combined weights; simply ranking companies by market value and dividing by 100 will not reproduce the published level.

## Worked example

Assume a **hypothetical**, simplified index with two securities and no weighting adjustments. It is not an example of actual Nasdaq-100 constituents or published index values.

1. Company A has 100 million index shares at US$50 each: its index market value is US$5 billion.
2. Company B has 100 million index shares at US$50 each: its index market value is also US$5 billion.
3. The combined value is US$10 billion. With a hypothetical divisor of US$10 million per point, the index starts at 1,000 points.
4. A rises to US$60 while B stays at US$50. Their combined value becomes US$11 billion. With the divisor unchanged, the index becomes 1,100 points—a 10% increase, even though A’s price rose 20%.

A real index has many more securities, and its weighting adjustments and divisor must be accounted for. This example excludes dividends and trading costs.

## Why it matters before you trade

An index move summarizes its constituents; it does not describe the execution conditions for any particular stock. Two Nasdaq-100 constituents can have different bid-ask spreads, daily volumes and volatility. The size of an intended order relative to a stock’s typical volume can also affect estimated market impact.

If a basket is intended to resemble the index, comparing its weights with the index’s weights can reveal concentration or sector differences. A basket of a few constituents is not automatically diversified simply because those companies belong to the Nasdaq-100. Nor does an index level state what a fund tracking the index will return after its own costs and tracking differences.

## How PreTrAIde uses it

The product facts do not say that PreTrAIde uses Nasdaq-100 membership or the index level as an input or benchmark. A related **pre-trade analysis** checks the stocks actually entered in a basket: each line has a side, quantity and execution conditions.

PreTrAIde estimates measures including spread, participation in daily volume, market impact and daily volatility. It also reports basket breakdowns and concentration, then provides decision-support verdicts and reasoning for the basket and its lines. Those assessments concern the submitted stocks and conditions, not an index forecast or a recommendation.

## Common mistakes

- **Confusing the index with Nasdaq:** Nasdaq is a stock exchange; the Nasdaq-100 is an index of selected Nasdaq-listed securities.
- **Assuming equal weights:** Larger constituents generally have greater influence, although modified weighting rules can adjust their weights.
- **Treating index movement as a fill price:** An index has no bid or ask at which a stock order executes.
- **Assuming membership guarantees liquidity:** A constituent’s spread and volume still matter for a specific order.
- **Ignoring the return measure:** A price index and a dividend-inclusive total-return measure answer different questions.

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Source: https://pretraide.com/glossary/nasdaq-100