Relationship of the SPY to SPX

Discussion in 'Stocks' started by BeatingtheSP500, Sep 11, 2008.

  1. Just a quick question here. The SPY is setup to be 1/10th the SPX, however there is a slight disconnect that occurs and it's pronounced right now (approx equal to the SPX 3 month dividend yield). Is it because of the distributed dividends reflected in the SPX vs the undistributed divvies in SPY? Next Fri the SPY goes ex-dividend so at that point it will trade with the near perfect 1/10th correlation?
  2. Intraday trading fluctuations and ETF fees and dividends may all account for SPY not trading exactly 1/10th of SPX. Remember it is an ETF designed to track the SPX and its holdings are traded and balanced regularly to maintain that relationship but trading fluctuations might push it a few pennies here or there at times.
  3. The companies in the SPX have paid their dividends all along, whereas the SPY holds them all for a quarterly dividend, which happens next Thurs. The disconnect right now is equal to the quarterly dividend, and when that's paid the SPY will drop 70 cents (or thereabouts) next Friday in relation in to the SPX. Which brings it back to the 1/10th correlation. I am just conjecturing, but would like a confirmation.
  4. Yeah just mentioning that it will not trade exactly at 1/10th like MNX trades 1/10th of NDX. As an ETF it can vary at times.
  5. btw, HAD someone held a gun to your head and made you sell naked options, and you chose calls, you would have made some nice jack.