On Friday after the close, the S&P Index Committee which generally re-balances the index quarterly, announced the additions and deletion to the S&P500 index.
This is a big event because it is estimated that there's over 11 trillion in assets bench-marked to the S&P500, with over 4 trillion in indexed funds.
The main story was that TSLA which many investors expected to be included this quarter, as it reported its forth consecutive quarter of profitability in July (one of the conditions in order to be eligible to join the index), was still left outside. If it was to join the index then more than 100 million shares of TSLA would have been bought by funds that track the index.
The new addition include ETSY (ETSY), Teradyne (TER), and Catalent (CTLT).
The deletions are H&R block (HRB), Coty (COTY), and Kohl's corp (KSS), which will move to the S&P midcap 400.
It is advised to watch the new comers carefully, and maybe implementing a call spread strategy, which anticipate some trend up in price, but only up to a certain point and in a specific timeframe.
The changes will take place at the close of trading on Friday Sep 18th (the monthly expiration date).
Ask yourself some of Ken's trade framing questions:
What do I see?
What could it do?
Which way would you trade it ?
Where would you enter?
Where would it fail?
Would you stop and reverse?
Where would it stall?
Where would you preserve?
Where would it then go?
Would you stop and reverse?
Where would you re-enter?
And some Options questions:
How many days to expiration do I want to give this position?
Is there any dividend Ex-date in that time period that I won't get as a holder of a call option?
Which strike do I want?
Where is my BE point?
What is the proper Position Sizing for me?
How does the Skew looks like?
Which Options strategy fits my forecast the best?
What is my R:R ?
And of course, don't forget to keep an eye on TSLA. The Support level is around 300.
And someday (maybe next quarter) it is going to be added to the S&P500 index too...
Also, interesting to see that stocks that are entering the S&P Small Cap 600 are going up today, while stocks that leave the s&p 600 (even if they join the Midcap 400) are going down.
