For traders, Nasdaq glitch highlighted value of futures

Getty Images

During Nasdaq's three-hour shutdown, traders who pulled up a chart of the Nasdaq composite or the Nasdaq-100 index were treated to a spooky flat line. But since futures continued to trade, investors who wanted to hedge their exposure were able to turn the Nasdaq-100 e-mini futures.

Shortly after trading halted Thursday afternoon, the Nasdaq-100 made a quick move lower, from which it recovered over the course of 20 minutes. Jeff Kilburg of KKM Financial says that was a direct response to the technical malfunction.

(Read more: Cramer: We need a disaster plan!)

"When you saw the official statement come out that the Nasdaq freeze was on, traders sold the Nasdaq e-mini down 10 handles. When there's any type of uncertainty, panic sellers do come into the market," said Kilburg, who is a CNBC "Futures Now" contributor. "But it wasn't a market crash, it was a market glitch—and there's a big difference. Once we realized that, the market came right back."

For traders, the shutdown served as one more reminder of the importance of the futures market.

(Read more: Trading automation and Nasdaq's tech glitch)

"This is exactly why futures were designed," said Rich Ilczyszyn of iiTrader and CNBC contributor. "If you go back 200 years, the whole concept of a futures contract was to mitigate risk."

And that's just what Ilczyszyn recommended doing Thursday. "We called up our clients and said, 'Hey, mitigate your risk now. If you're long the market, short the futures.'"

(Read more: What to call the Nasdaq halt? We asked on Twitter)

The bottom line is that futures are another way that active traders can manage their portfolios, especially in cases where something goes really wrong.

"This will happen again, so you need to have a game plan. And you need to know what vehicles are out there," Ilczysyzn said, adding: "Every active trader should have more than one way out of the market."

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

Watch "Futures Now" Tuesdays & Thursdays 1 p.m. ET exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow.

Follow us on Twitter! @CNBCFuturesNow.

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.