S&P 500 Index

What is the S&P 500 Index?

The S&P stands for Standards and Poor’s. The 500 refers to the top five hundred stocks which have been selected to have the market size, liquidity and industry grouping, along with other factors, to represent the large cap stocks of the American equities market.

Uses of the S&P 500 Index

This index gives an investor or investment manager an understanding of the performance of the top 500 stocks within America. This index can be used to hedge long and short positions held in a portfolio by using either futures or option contracts.

Risks of the S&P 500 Index

All futures contracts will feature the same risk through the direction in which you anticipate the contract to rise or fall. If you anticipate a currency to increase in value and it ends up falling in value. The long position that you hold will also fall in value.

With any index it is susceptible to the performance of the underlying stock. If the underlying securities are performing poorly, then a decrease in the index is more than likely to be expected.

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