CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.Between 51%-80% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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 method of trading that allows you to take advantage of a decrease in an asset’s value. You short a stock by borrowing the asset 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 coronavirus stock market crash.
How 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 the NASDAQ with CFDs.
Invest in inverse ETFs
Inverse ETFs track an underlying index, such as the NASDAQ, but instead of following it closely, it moves in the opposite direction. So let’s say the NASDAQ was to rise in value by 2%, an inverse ETF that’s tracking it will decrease in value by 2%.
People generally invest in inverse ETFs to get profits in a very short period of time. It’s for this reason that they can be known as “ultra-short funds”.
You can get leveraged inverse ETFs, which can give you two or three times the exposure that 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 know the risks.
How to short the NASDAQ with derivatives
Another way of shorting the NASDAQ is to take a short position using derivatives. This allows you to take a position on the stock without actually owning it. You could do this by taking a short position on a selection of the stocks that are on the NASDAQ, like Apple, Amazon, Netflix and Tesla.
Alternatively, you can open a position on the NASDAQ 100 index, as long as the provider you choose allows you to.
How to short the NASDAQ: Step-by-step
Choose a provider. There are loads of different platforms out there, and they’re popping up all the time! Make sure you don’t choose one willy nilly – have a look at the fees and features and make sure it offers the types of investments you’re looking for.
Open an account. You’ll need to open an account with your chosen provider. You may need to give some details, like your National Insurance number or show some ID.
Deposit funds into your account. If you’re investing in a foreign fund then you may need to pay a foreign exchange fee to convert your funds into dollars.
Take a short position or invest in a NASDAQ inverse ETF. You can often start trading as soon as your account is set up and funded.
Compare CFD trading accounts
Warning: Between 74-89% of retail investor accounts lose money when trading CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The NASDAQ fared the coronavirus pandemic pretty well. It ended with a gain of 42.87% over 2020. Only time will tell how it will perform in the ongoing coronavirus pandemic in 2022.
What is the NASDAQ Index?
The NASDAQ Index, also known as the NASDAQ Composite, is made up of over 3,000 stocks and shares that are listed on the NASDAQ exchange.
Some of the biggest stocks in the world are on the NASDAQ, including the FAANG stocks, which are Amazon, Google, Apple, Facebook and Netflix.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Zoe was a senior writer at Finder specialising in investment and banking, and during this time, she joined the Women in FinTech Powerlist 2022. She is currently a senior money writer at Be Clever With Your Cash. Zoe has a BA in English literature and a Diploma for Financial Advisers. She has several years of experience in writing about all things personal finance. Zoe has a particular love for spreadsheets, having also worked as a management accountant. In her spare time, you’ll find Zoe skating at her local ice rink. See full bio
Zoe's expertise
Zoe has written 176 Finder guides across topics including:
Trading CFDs carries a high risk, as you trade on real-time movement of the financial market. Give yourself an understanding of these risks with our guide.
How investors made money post-Brexit by shorting the FTSE.
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Warning: Between 74-89% of retail investor accounts lose money when trading CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.