There Is More to Nasdaq ETFs Than QQQ

The Nasdaq-100® is one of the most well-known indexes in the investing world. Representing the largest non-Financial listings on the Nasdaq exchange, the Nasdaq-100® Index (NDX) has futures and exchange-traded funds (ETFs) with significant liquidity and investor interest. 

But it’s not the only way to buy Nasdaq stocks. In fact, with over 30 U.S.-listed ETFs dedicated to tracking Nasdaq listings (or almost exclusively all Nasdaq-listings see more information below about PHLX Semiconductor™), there might be a Nasdaq ETF for everyone. 

Chart 1: Nasdaq company ETFs trade almost $23 billion each day across 10 different exposures 

One ETF for all Nasdaq companies 

Nasdaq is known for being home to many of the new companies in the market, including disruptive technologies and healthcare research. At the end of 2022, the Nasdaq exchange listed 3,700 different stocks. 

One ETF tries to cover them all. The ONEQ tracks the Nasdaq Composite Index®, which represents all companies listed on Nasdaq (all dots in Chart 2) and will celebrate its 20th anniversary this year. 

Trading all 3,700 stocks would be impractical for most investors (in fact, even the ETF fund is optimized for liquidity). The median spread on the underlying stocks is 107.9 basis points, although the market cap-weighted spread is better at 10.2 basis points. Either way, buying and settling the stocks would also be much more expensive than buying the ETF, which trades with a spread of 6.6 basis points (grey dots in Chart 1). 

ETFs covering different-sized companies 

The most popular Nasdaq index for ETFs remains the large-cap Nasdaq 100 Index®.  

The Nasdaq-100® includes the 100 largest Nasdaq companies, excluding Financials. The median market cap for Nasdaq-100® stocks is around $45 billion with a spread on the underlying stocks of 6 basis points, but its holdings range from Apple (AAPL) and Microsoft (MSFT) with a market cap of around $2 trillion to companies like Zoom (ZM), ZScaler (ZS) and Lucid (LCID) with market caps around $15 billion (blue dots in Chart 3). 

Note that some of the most well-known Nasdaq market cap weighted indexes specifically exclude Financial companies, which means they exclude banks, exchanges (including NDAQ), Real Estate Investment Trusts (REITs) and SPACs. 

The most liquid ETF tracking the Nasdaq-100®, QQQ, is the second most liquid ETF in the U.S. It trades almost $13 billion each day, with a spread of just 0.57 basis points and assets of $145.9 billion.  

But it’s not only the QQQs that track the Nasdaq-100®. Other ETFs that track the Nasdaq-100® Index include: 

• Levered Nasdaq-100® ETFs for hedgers and short-term trades: This includes long-levered exposures from TQQQ (+3x) and QLD (+2x), to short exposures from PSQ (-1x), QID (-2x), and SQQQ (-3x). Combined, these trade a combined $9.6 billion each day. 
• More like a typical ETF: QQQM also tracks the Nasdaq-100® but will have slightly different returns because it reinvests dividends (until distributions are payable) and can earn income from securities lending. 
• Equal weight: QQEW and QQQE hold the same 100 companies but invest an equal dollar value into all companies at the time of each quarterly rebalance. That means, with 100 stocks in the index, the find holds around the same exposure to (1% of its assets) in both AAPL and LCID. 

Although the Nasdaq-100® Index covers around 75% of Nasdaq’s total market cap, there are thousands more companies in the Nasdaq universe, from Coinbase (COIN) and First Solar (FSLR) and Roku (ROKU) to Sleep Number (SNBR). Two relatively new ETFs track a group of mid- and small-cap Nasdaq companies: 

• Mid cap: QQQJ tracks the next 100 companies by market cap, excluding Financials (yellow dots in Chart 2). The median market cap for these stocks is around $12 billion, with a spread on the underlying stocks of 11 basis points. 
• Small cap: QQQS tracks 200 smaller cap companies, excluding Financials. It picks companies with the highest proportion of patent value percentage to their market cap and is designed to capture the most innovative small-cap companies based on how much capital they have invested into patents (pink dots in Chart 2). The median market cap for these stocks is around $600 million, with a spread on the underlying stocks of 29 basis points. 

Chart 2: Comparing market cap and liquidity of companies in the Nasdaq-100® (blue), Next Gen 100 (yellow) and Innovator 200 (pink) Indexes to the overall Composite index (grey) 

ESG and Momentum-driven ETFs 

As the ETF industry has evolved, so too have the needs and requests of investors. ESG has been a theme that has continued to gain steam. Momentum or tactically driven strategies are another alternative to providing exposure to subsets of the Nasdaq-100® or with the potential for allocations to T-bills. 

Nasdaq-100 ESG index™ ETF: 

• QQMG tracks the Nasdaq-100 ESG Index™. 

Momentum or tactically driven ETFs that provide exposure to the Nasdaq-100®:  

• QQQA selects Nasdaq-100® stocks based on Dorsey Wright’s price momentum signals. 
• PTNQ toggles allocations across the Nasdaq-100®, T-bills or both as momentum changes. 

ETFs tracking specific sectors 

In addition to broad market ETFs, there are a number of ETFs tracking specific sectors. 

Nasdaq is known for its Technology stocks. One ETF (QTEC) holds just tech listings from the Nasdaq-100®. That’s around 40 stocks from Technology subsectors, including Software, Semiconductor, Production Technology Equipment, Consumer Digital Services, Computer Services and Computer Hardware. 

Then there is its opposite, (QQXT), the ex-Technology Sector Index Fund. This ETF invests in the other (roughly 60) Nasdaq-100® companies across the Consumer Discretionary, Health Care, Industrials, Consumer Staples, Telecommunications, Utilities and Basic Materials industries. 

Two more popular Nasdaq sectors for issuers are Biotech and Semiconductors.  

With the Nasdaq Biotech Index (NBI) and its tracking ETF (IBBQ), it’s all Nasdaq-listed names. Finally, there’s the Nasdaq Junior Biotech Index (NBIJR), which tracks only the smaller companies in NBI with market caps under $5 billion.  

Although not technically all Nasdaq listings, the overwhelming majority of the PHLX Semiconductor Index (SOX) and its tracking ETF (SOXQ) holdings are Nasdaq stocks.  

ETFs with options overwriting 

There are also a lot of Nasdaq-100® ETFs that use options to add protection or use option overwriting to collect income, sometimes both, including:  

• QYLD Nasdaq-100® Covered Call ETF, which holds Nasdaq-100 stocks and writes (sells) options simultaneously, generating option premium. 
• QYLG Nasdaq-100® Covered Call & Growth ETF buys the stocks in the NDX and writes (sells) corresponding call options on about 50% of the index, retaining 50% of the capital gains in bull markets by trading off for lower income.  
• QRMI Nasdaq-100® Risk Managed Income ETF is a covered call fund that also mitigates the risks of a major market selloff with a protective put. 
• QCLR Nasdaq-100® Collar 95-110 ETF employs an even tighter collar strategy for investors seeking range-bound equity returns. 
• QTR seeks to buffer against market selloffs by owning the stocks in the Nasdaq-100® Index, coupled with buying 10% out-of-the-money put options on the NDX. 

And then there are even ETFs that combine active option and/or stock selection: 

• NUSI is an actively managed fund that utilizes an options collar, but it is in conjunction with actual investment in the NDX. 
• JEPQ is an actively managed portfolio that selects innovative large-cap companies intended to outperform the NDX while also earning income from selling out-of-the-money options on the NDX. 
• QQC tracks large-cap U.S. growth stocks in the NDX while protecting from large market moves up or down with an options overlay, while the related fund QQD just adds protection from a downside move. 
• TUG and TUGN both seek to reduce equity exposure in bearish market environments while remaining invested during bullish market environments. TUGN adds options to generate monthly income. 

QMAR, QJUN, QSPT and QDEC use FLEX Options to employ a target outcome strategy, which seeks to produce pre-determined investment outcomes. 

Chart 3: Nasdaq ETFs with active options (colored by underlying exposure) 

Nasdaq companies are in lots of ETFs with plenty of liquidity and tight spreads 

Although I love meeting all the interesting companies that list on Nasdaq, even I was surprised to see just how many ETFs have been designed around the family of Nasdaq indexes and companies. 

And the trading data shows our market makers for these products are providing deep liquidity with tight spreads. Overall, these ETFs trade almost $23 billion each day. Most of the products have spreads under 10 basis points, although some more complex ETFs with an options overlay cost more.  

Ranging from large-cap index funds to active options overwrite funds, there really is a Nasdaq companies ETF for everyone.  

Mark Marex, U.S. Index Research and Development at Nasdaq, contributed to this article.  

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Phil Mackintosh

Nasdaq

Phil Mackintosh is Chief Economist and a Senior Vice President at Nasdaq. His team is responsible for a variety of projects and initiatives in the U.S. and Europe to improve market structure, encourage capital formation and enhance trading efficiency. 

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