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Major Changes to the Dow Jones Industrial Average

Updated: Aug 26, 2020

The following trade frame is an example for educational purpose only. Please read the Disclaimer at the bottom.


Salesforce, Amgen and Honeywell will replace Exxon Mobil, Pfizer and Raytheon Technologies, at the end of the session on Friday, August 28th.


https://www.cnbc.com/2020/08/24/salesforce-amgen-and-honeywell-added-to-dow-in-major-shakeup-to-the-average.html?__source=iosappshare%7Ccom.google.Gmail.ShareExtension


The change was prompted by apple's 4-for-1 split, which would reduce the exposure of the Dow index to the technology sector.


CRM (reports earnings today amc), HON, AMGN were up about 3-4% in the after hours session.

XOM, PFE, RTX were down 1-3%.


AAPL will go down from being most influential stock in the index to the 17th place.


Trading implications:

Big money that tracks the DJ index will make the changes on Friday close.

Options that expire on Friday could have high volatility.


Closing options positions on Friday should be by Selling/Buying the underlying itself (MOC/LOC orders) and then exercising the options.


APPL could also have selling pressure and after being in overbought RSI condition for some time, can see some drop in price.


Yesterdays options prices are irrelevant now. When the stocks prices will stabilize, we can trade frame this opportunity.


A special attention should be to day trading on Friday expiration date, as the options will lose most of their time value, and could be undervalued at the first hour of trading.


Interesting times...


UPDATE - as the session begins.

And off they go:


Just to clarify:

6440$ controls the right to sell 632,000$ (100k AAPL, 228k PFE, 124K XOM, 180K RTX).

And 4300$ controls the right to buy 415,000$ (167K HON , 247K AMGN).

(still need to balance the delta by buying 10 CRM calls after the earnings - or maybe 5 now and 5 later).


Update after 2 days -

Here's what they did so far:










Friday's close should be interesting...


Disclaimer

We are not an investment advisory services, nor are we registered investment advisors or broker-dealers and do not purport to tell or suggest which securities customers should buy or sell for themselves. Customers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment.

It should not be assumed that the methods, techniques, or indicators presented in this example will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. We, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.


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