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Tesla day

Jason Goepfert
2020-12-18

The addition of Tesla to the S&P 500 is one of the bigger events of the day as traders are anticipating massive flows not just in that specific stock, but reverberations throughout the market.

It's worth noting that we didn't see headlines like this when the stock got looked over at the previous index committee meeting.

This is a good time to reiterate the table from one month ago when the Tesla addition was announced. When a big stock got added to the index, it had a strong tendency to rally after the announcement date. But after it actually became part of the index, returns were poor.

Another interesting wrinkle is in the options market. Currently, options on 10% out-of-the-money calls on Tesla are more than 3 times more expensive than equivalent out-of-the-money puts on the S&P 500. Traders are willing to pay a lot more for upside potential in TSLA than they are for protection against the S&P. Other times it was this high, the stock underperformed the index.

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