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An option based on the value of a stock index (like the S&P 500). It's not different than a typical stock option; the only difference is the underlying asset that determines the value of the option (an index price instead of a stock price).
Stock market indices play an important role in gauging the economic health and progress of a country. Oftentimes someone will say "the Stock Market is up" or "down" but that is not necessarily a meaningful statement. Understanding how stock market indices are calculated and their history can be very instrumental in understanding the stock market as a whole.
The Origin Of The Stock Market Index
As stock markets became more and more prevalent in industrialized countries, people began to look for a "barometer" of the stock market as a whole. The very first stock market index was the Dow Jones Transportation Average, which was created by Charles Dow in 1884. It was followed shortly thereafter by many more indexes like the Dow Jones Industrial Average which, in a very modified form, is still widely publicized and followed today.
How Indices Are Calculated
A stock market index is generally calculated by combining a weighted average of a set of particular stocks. For example, in the case of the Dow Jones Industrial Average, 30 stocks are weighted by price to get a measurement of the market as a whole. It should be noted that all indices are somewhat arbitrary and are more useful as indicators of relative and historical growth rather than a raw number. Additionally, in many indices stocks often times are added or removed due to bankruptcies or simply becoming less relevant than another stock. Most recently Kraft Foods replace AIG in the Dow Jones Industrial Average.
Popular Stock Indices
What else can I help you with?
What is triple witching stock options?
There are four "triple witching" days on the calendar: the third Fridays of March, June, September and December. On these days, the contracts for stock index futures, stock index options and stock options all expire.
What is quadruple witching in relation to the stock market?
Quadruple witching is the date on which contracts for stock index futures, stock index options, stock options and single stock futures all expire on the same day. These days occur on the third Fridays of March, June, September and December and lead to increased volume and fluctuations in the markets.
What is A share index?
It actually means this. stock index Or stock market index.
What is the German stock index?
The main German stock index is the DAX.
Why option premium changes daily and how in index and stock options?
The option premium changes based on the change of stock price, days to expiration, change in implied volatility and dividend price. Options Weekly has a nice tutorial on options, see related links.
How would a stock market index help me?
A stock market index helps you determine the value of a stock by determining the potential return on investment for a selected companies stock. The type of index depends on the industry.
The difference between europeran option and American option?
Most stock options that are bought and sold are "American-style" options which means they can be exercised at any time by the option owner during the lifespan of the option. A few options are "European-style options". This means that they can only be exercised at the end of the option's lifespan, just before expiration. Most European-style options are index options. A few that may be of interest are NDZ, the Nasdaq-100 index; RUT, the Russell 200 index, and SPX, the S&P 500 index. For more information about using options please visit http://www.safe-options-trading-income.com
What is the index pressure?
Index pressure refers to the relative weight or influence of a particular stock or security within a stock market index. It is determined by factors such as the market capitalization of the component stock or the price movement of the security in relation to the overall index. High index pressure suggests that the performance of that particular stock or security has a significant impact on the overall movement of the index.
Where can one find information on Trading Index Options?
Information on Trading Index Options can be found at eToro, eSignal, Index Options Authority, Options Trading Mastery and the Chicago Board Options Exchange. Actual quotes can be found at NASDAQ.
What are some of the most popular stock market indexes?
American Stock Exchange (AMEX) composite index Dow Jones Industrial Average (DJIA) index NASDAQ composite index NASDAQ 100 index New York Stock Exchange (NYSE) composite index Russell 3000 value index Standard and Poor's (S and P) 500 index
What is a composite stock index?
A Stock Market index option is a kind of option. In fact, it is a kind of financial derivative. It is often tied to either a narrow-based index or a broad-based index.
What is the oldest stock index in existence?
The oldest stock index in existence is the Dow Jones Industrial Average, which was created in 1896.
