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Freaky Friday and Manic Monday are coming-Quadruple Witching followed by S&P500 Rebalancing

Jun 19, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • It’s that time of the quarter again, time to rebalance the S&P 500 index, which will happen after the close this Friday
  • This rebalance comes at the end of the day that will see futures and options expire on both stocks and stock indexes, a phenomenon  know as Quadruple Witching
  • For those not familiar with the term, Investopedia explains:
    • Quadruple witching derives its name from the volatility—or havoc—inherent in all of these derivative products expiring on the same day. The witching hour is the hour between midnight and 1 a.m. when supernatural beings are said to roam the earth bringing havoc and bad luck to those unfortunate enough to encounter them.
  • These comes 4 times a year, on the third Friday of March, June, September and Deccember
  • Friday will see elevated volume, which is normally the case, as expiring contracts are executed automatically

 

 

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

  • The S&P 500 will be rebalanced after the close and Monday will be the first trading day in which investors will be able to adjust their portfolios
  • ETFs that follow the S&P 500 will need to buy and sell stocks Monday morning to rebalance and reflect the new S&P 500 weightings of its members
  • Barron’s shared some preliminary weighting changes it saw from S&P that showed tech’s weighting will drop in the new weightings
  • The biggest changes in the S&P 500 are
    • Tech drops to 21.228% from 21.307%
    • Real Estate rises to 3.171% from 3.140%
  • The drop in tech’s weighting has much to do with the massive levels of buy backs in the tech sector, the aggregate value of the information technology stocks in the index was 0.78% lower than it was on March 15 due to those buy backs
  • Get ready for the wild ride

 

 

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Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS