In past Trade of the Day issues, we’ve discussed the tactical trading strategy of playing market volatility – and, more recently, oil market volatility – by using two different exchange plays:
For today, I’d like to add one additional name to this list: Nasdaq Inc. (Nasdaq: NDAQ).
As I’m sure you can guess, Nasdaq Inc. is the operator of the Nasdaq stock market, which is part of a so-called “comfortable oligopoly” among exchange-related plays.
Nasdaq Inc.’s trading revenues are tied to trading volumes, so periods of increased trading frequency lead to more transaction volume gains. Just like Cboe Global Markets and Intercontinental Exchange, Nasdaq Inc. could offer a “safe haven” way to capitalize on panic-selling in times of heightened market volatility.
The business breaks down like this…
Market Services
- Operates various exchanges and offers equity-derivative trading and clearing, cash-equity trading, fixed-income and commodities trading and clearing, and trade-management services.
Corporate Services
- Offers liquidity solutions, such as capital-raising solutions for private and public companies.
Information Services
- Sells and distributes historical and real-time quote and trade information to retail online brokers, proprietary trading shops, internet portals, and data distributors.
- Offers Nasdaq-branded indexes and financial products. In other words, for any site to access historical Nasdaq data, it’ll have to pay fees for that right.
Market Technology
- Provides trading, clearing, settlement, surveillance, depository, and information dissemination to various markets, as well as SMARTS and TradeGuard, which are suites of products for risk management.
In addition to these segments, Nasdaq Inc. has recently gotten into some new ventures that are pinching margins in the near term but may bear fruit in the longer term.
One such venture is the Nasdaq Financial Framework, which is an order-matching and price-dissemination system used by other capital-market operators – and even some sports betting markets.
Right now, this technology is being used for betting with the Hong Kong Jockey Club – and also on the soccer-oriented Football Index. If proven successful, the Nasdaq Financial Framework could evolve into a far larger profit center for Nasdaq Inc.
For instance, Nasdaq Inc. estimates that the available market for this technology could reach $22 billion.
Analysts at Oppenheimer are even more optimistic. They think the nonfinancial customers for the technology could grow into a market worth $32 billion. That’s why they just upgraded Nasdaq Inc. with a 12- to 18-month price target of $111.
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Action Plan: With proprietary assets that have a nearly impossible barrier to entry, let’s keep an eye on Nasdaq Inc. going forward. A retest of the support levels anywhere below $100 might be a viable entry spot.
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[adzerk-get-ad zone="245143" size="4"]About Bryan Bottarelli
Whether it was selling the Star Wars figures he collected as a little boy for 50 times their value or using the $125 he made cutting grass to buy a Michael Jordan rookie card that he later sold for $1,500, it was always clear that Bryan Bottarelli was a born trader – possessing the unique ability to identify opportunities and leverage his investments.
Graduating with a business degree from the highly rated Indiana University Kelley School of Business, Bryan got his first job out of college trading stock options on the floor of the Chicago Board Options Exchange (CBOE). There, he was mentored by one of the country’s top floor traders during the heart of the technology boom from 1999 to 2000 – trading in the crowded and lively Apple computer pit. Executing his trades in real time, Bryan learned to identify and implement some of his most powerful trading secrets… secrets that rarely find their way outside the CBOE to be used by individual traders.
Recognizing the true value of these methods, Bryan tapped into his entrepreneurial spirit and took a risk. He walked off the CBOE floor and launched his own independent trading research service called Bottarelli Research. From February 2006 to December 2018, Bryan gave his precise trading instructions to a small, elite group – most of whom have been followers ever since.
As a “play tactician,” Bryan uses his hands-on knowledge of floor trading to shape opportunities and chart formations into elegant, powerful and profitable recommendations. And by using the same hedging techniques taught by professional floor traders, Bryan is able to deliver his readers remarkable gain opportunities while strictly limiting their total risk.
Along the way, Bryan has developed a cumulative track record that could impress even the most successful hedge fund manager.
He now spends his days moderating one of the most elite trading research forums ever created: The War Room.
