A Trading System : Hot Topic

S&P 500

A small number of shares control a big percentage

The e-mini S&P 500 contract (ticker symbol: ES) which we predominately trade here is a futures contract based on the S&P 500 cash index calculated by the CBOE.

On 15 July 2004 I took a look at the index and thought that this information would be of value to traders of the ES. Click here to download or open a spreadsheet showing the components of the S&P 500 as of 15 July 2004.

The top 10 stocks by market value (i.e. 2% of the index by number) have a 22% weighting on the index. Because this index is a value weighted index (unlike the DJIA which is a price weighted index), movements in the larger stocks will have a greater impact on movements in the underlying index. At the time of writing this (15 July 2004) the top ten stocks in this index (in market value order) were:

General Electric 3.21%
Microsoft Corp. 2.93%
Exxon Mobil Corp. 2.77%
Pfizer, Inc. 2.46%
Citigroup Inc. 2.26%
Wal-Mart Stores 2.11%
American Int'l. Group 1.77%
Intel Corp. 1.66%
Bank of America Corp. 1.63%
Johnson & Johnson 1.56%

The second column shows the % weighting they have in the S&P 500 index.

So a 1% change in the price of General Electric will have about double the impact on the value of the S&P 500 cash index as a 1% change in Johnson & Johnson. This translates to equally to the lower weighted stocks in this index.

This is a note from the NYSE about the S&P 500:

A capitalization weighted index of 500 stocks. The index is a standard by which investors measure the performance of the large cap US stock market. The 500 stocks of this index are selected for being a representative sample of leading companies in leading industries. Many money managers index their portfolios to match the S&P 500, so the return on their investments keep pace with the performance of the index.