Can someone explain how the value of QQQ is calculated? What is the mathematical relationship between the value of QQQ and the value of the Nasdaq 100 Index? When I look at SPX and SPY, the relationship is clear. I get the fact that SPY will never be exactly one tenth of SPX, because SPY has dividends and expenses and la la la la la la la la la. But the variance between the two values is very low, and the mathematical relationship between the two is pretty transparent. On Friday, the NDX closed at 13798.11 and QQQ closed at 378.39. Was QQQ designed to be the index multiplied by 2%? Or 2.5%? Or something else?
QQQ is an ETF and has a Net Asset Value (NAV) based on the last sale of the portfolio. It is kept in line with market makers that are able to buy or short the holdings and submit that to Invesco, the ETF manager for the ETF-This is called creation/redemption. https://www.invesco.com/qqq-etf/en/about.html#top-10-holdings. https://www.ssga.com/us/en/intermediary/etfs/resources/education/how-etfs-are-created-and-redeemed NDX is the same holdings in the same percentages, but QQQ has fees charged and NDX was never indexed to make it a smaller value. They are both based on the same modified capitalization-weighted index. So, they track together as long as creation/redemption is efficient.
On Friday, they both went up by 2.25%. TQQQ went up 6.67%. PSQ went down by 2.17%, but SQQQ only went down by 4%. The opportunity was in SQQQ.
"QQQ is an exchange traded fund (ETF) designed to correspond to the price and yield performance of the NASDAQ-100 Index, which consists of NASDAQ's largest 100 non-financial companies. QQQ currently trades at a value set by NASDAQ at approximately 1/40 th of the value of the NASDAQ-100 Index." - Nasadaq.com