Options Trading System

About S&P 500 Index

The Standard and Poor's 500 index - S&P 500 index (^SPX) consists of 500 stocks of Large-Cap corporations. These public companies are the biggest American corporation traded on the NYSE (New York Stock Exchange) and NASDAQ. The 500 companies from the S&P 500 index represent different industries in the U.S. economy and they are considered as the leading companies in their industries.

The following industries are represented in the S&P 500 index:

1. Consumer Discretionary
2. Consumer Staples
3. Energy
4. Financials
5. Health Care
6. Industrials
7. Information Technology
8. Materials
9. Telecommunications Services
10. Utilities

By tracking 500 leading U.S. companies, the S&P 500 is considered as one of the best indexes that reflects the U.S economy sentiment and this index is the second after DJI (Dow Jones Industrials) most analyzed index.

The Standard and Poor's indexes history starts in 1923 year, when the first S&P 90 index was calculated. Due to the complex calculation this index was published on a daily basis (not in real time). Another index based on 423 public companies was published on a weekly basis. Only in 1957 (when the computer technology made possible to calculate index in real time) the S&P indexes calculations were put on real time track. On March, 1957 the S&P 500 index was introduced to the world.

The same as in case with the DJI (DOW 30) index and in opposite to the Russell indexes the committee selects the companies that are included into the S&P 500 index. The selection is made by the company value and shares liquidity factors, when only the large publicly traded on NYSE and NASDAQ companies are considered with high liquid shares. The large companies with not liquid shares (due to the high stock price for instance) are not included in the index.

In the beginning, the S&P 500 index was calculated as market value weighted index, when the public companies with bigger total market value (price of the shares times number of outstanding shares) would have stronger affect on the price of the index while the smaller in total market value companies would affect the index price less significantly. However in 2005 the index calculations have been converted into the float weighted, which means that only shares that are available to public trading are taking part in the index calculation.

The main way of investing into the S&P 500 index is to buy stocks of the companies from the basket of this index. You may find a number of the mutual funds that invest into these companies. Yet, there are numbers of ways to invest directly into the index. With introduction of the Exchange Traded Funds (ETFs) a trader may invest directly into a stock that tracks the S&P 500 index. SPDRs, commonly called as "Spider"�, stays for Standard & Poor's Depositary Receipts. The SPDRs track the S&P 500 performance and is traded under the SPY ticker on the AMEX. There are other less popular ETFs that track this index: the S&P 500 index: iShares S&P 500 (symbol: IVV), S&P 500/BARRA Growth Index Fund (IVW), S&P 500/BARRA Value Index Fund (IVE). Besides the ETFs there are other trading vehicles that attract more risky traders who analyze the indexes: S&P 500 index options, SPY options, S&P 500 e-mini futures. The Rydex and ProFunds funds that tracks the S&P 500 index has become very popular as well.