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How to short the Nasdaq

Find out how to short the second biggest stock exchange in the world.

In turbulent times, it’s a given that people want to short the Nasdaq, given that it’s the second largest stock exchange in the world. While it’s unlikely that you can get exposure to the entire stock exchange, you can invest in Nasdaq ETFs or in the Nasdaq Index.

What does “shorting” the Nasdaq mean?

Short selling, or “shorting,” is a trading method that allows you to take advantage of a decrease in an asset’s value. You short a stock by borrowing it from a broker to sell it, then purchase it back later at a (hopefully) lower price. It’s particularly popular to short a stock or market when there’s a stock market crash, such as during the COVID-19 pandemic.

How to short the Nasdaq: Step-by-step

  1. Choose a provider. There are loads of different platforms out there, and they’re popping up all the time! Look closely at fees and features to make sure the platform you choose offers the types of investments you want.
  2. Open an account. You may need to provide some details, like your Social Security number (SSN) or proof of ID.
  3. Deposit funds into your account. If you’re investing in a foreign fund, you may need to pay a foreign exchange fee to convert your funds.
  4. Take a short position or invest in a Nasdaq inverse ETF. Usually, you can start trading as soon as your account is set up and funded.

2 ways to short the Nasdaq

There are loads of different ways that you can short the Nasdaq. The most commonly used method for the average investor is to invest with inverse exchange-traded funds (ETFs). Another method is to take a short position on Nasdaq-listed stocks with derivatives.

Invest in inverse ETFs

Inverse ETFs track an underlying index, such as the Nasdaq. But instead of following the index closely, an inverse ETF moves in the opposite direction. So, let’s say the Nasdaq rises in value by 2%. An inverse ETF tracking it will decrease in value by 2%.

People generally invest in inverse ETFs to earn profits in a very short period of time, which is why these funds can also be called “ultra-short funds.”

Leveraged inverse ETFs can give you 2X or 3X the exposure you’d usually get. “Leverage” is effectively borrowing, so it’s possible to lose more than your initial investment with this method. Make sure you understand the risks before investing.

How to short the Nasdaq with derivatives

Another way of shorting the Nasdaq is to take a short position on Nasdaq-listed stocks (like Apple, Amazon, Netflix and Tesla) using derivatives such as options or futures. This allows you to bet on a stock’s change in price without actually owning the stock.

With a stock option, you can buy or sell a stock at a specified price during a certain period of time. If you agree to buy and sell a stock in the future at a specific price and the price ends up being lower, you’ll make a profit.

With a futures contract, you agree to buy or sell a stock at a predetermined price on a specific date. You’ll profit if, for example, you agree to sell at a higher price than a stock is worth at the time of transaction.

Alternatively, you can open a position on the Nasdaq 100 index, as long as the provider you choose allows you to do so.

How to invest in the Nasdaq

How is the Nasdaq performing?

What is the Nasdaq index?

The Nasdaq index, also known as the Nasdaq Composite, is made up of over 3,000 stocks listed on the Nasdaq stock exchange.

Some of the biggest stocks in the world are on the Nasdaq, including the FAANG stocks—Amazon, Google, Apple, Facebook and Netflix.

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