Index rebalancing. Do not be long this Friday.

by BeernerdoMazzeroli

This week will see the inclusion of $TSLA into the SNP. Typically how this works is when a stock is added to the index, another company comes out. The market cap of the new company is usually larger than the exiting one. Since the S&P 500 index is market cap weighted, the weightings of all the other stocks need to come down to make room for the new company.

Tesla will enter the SNP as the 7th largest stock. This has never occurred before.

This means that an absolutely massive amount of equity, $50 Billion +, has to be sold to make room for it.

The table below shows the current weighting of the largest SNP stocks and amount of equity to be sold, with the largest being $AAPL.

imgur.com/gallery/qxtcvLu

The chart below shows the DOM (depth of market) for $AAPL as of yesterday 14:20. The COB is the current order book with the red areas showing a representation of the resting limit orders currently in the market, the actual orders and size are on the side. (This information is typically not available to retail)

imgur.com/gallery/bCaBMbB

Notice the large resting orders of big traders at 128, which is about where the stock stopped yesterday. Above that 129, and then an absolutely huge order at 130.

Big institutions are getting out as everyone is FOMO’ing in.

They will support this market into Friday and buy any small dips in order to keep the buying going whilst they get out.

As of yesterday afternoon I am mostly short with my only long positions $PSTH, and some Uranium and energy. Do not trade your money into the hands of these players, you can always get back in next week, the market won’t run away from you in 3 days.

Positions:

  • $BRKB Long Put March 21 exp;
  • $AAPL Long Put Friday exp;
  • $ERX Long Call ’22 exp;
  • $URA Long Call June ’21 exp;
  • $PSTH Long Call Jun 18’21 30 (gang gang);
  • Long equity: $BTWN, $REMX, $UGL;
  • Short equity: $WKHS

preview.redd.it/rmlz2of7zi561.png?width=2677&format=png&auto=webp&s=2e4de8a7a3e467d911870d413273227de49b2681

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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