What is the deal?? I have no idea how to trade them. FWIW, the additions will be effective 12/23 (mon) at the OPEN. Thx,
Nope, once they are initially announced .. it's very bullish for the stock that is being put in since they'll be getting massive institutional interest. For those being taken out, it's very bearish. but with everything, once the news comes out.... you couldn't possibly respond fast enough to exploit much.
saw this over at minyanville.com and thought it might be of interest ... "I wanted to quickly walk you through the process of an NDX rebalancing. Fifteen names in the NDX 100 are going to be removed and fifteen new names are going to take their place. Letâs say that the average price of the âdeletesâ is (for arguments sake) $1 and the average price of the âaddsâ is $5. In order to raise the money to pay that incremental $4, index funds will have to sell the other 70 (unaffected) names (the actual calculation is based on capitalization, not stock price, but you get the gist). I am hearing, and this purely conjecture and NOT actionable, that the sell pressure on the index (into tomorrowâs close) could be (up to) $750 million. Iâm not gaming it, mind you, but I wanted to be your ears on this one. " - Todd Harrison
The rebalance today was quit interesting. They tanked all 15 additions all day long and ran up some pos deletions at the eod. eg abgx, pmcs, etc. APCC and PETCO had good shorting opps but they didn't run it into the bell like the old days. Oh well, Omar
part of the problem was that unlike the s&p 500 there are not that many funds linked to the ndx. in the long term i think this is bad for the ndx. they are adding stocks that are close to their highs.when these stocks sell off the ndx can set new lows.