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Strategies & Market Trends : Tech Stock Options
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To: Nancy who wrote (45374)6/10/1998 9:28:00 AM
From: Kevin  Read Replies (3) of 58727
 
>>> How S&P determine to add stocks to replace the one being acquired ? are they pick the one on the list after 500 based on market cap ? <<<

Hi Nancy. I get this question regularly, and unfortunately there is no solid answer for it because S&P keeps it a secret. There is a minimum market cap for a stock to be included in the SPX and also volume criteria. My estimates from looking at the last few dozen adds to the SPX are that the stock needs at least 100,000 shares per day trading volume (more commonly over 200,000 shares per day) and a minimum market cap of $500 million. I aso believe they look at specific sectors when an addition is needed, so that a certain 'breakdown' is kept.
I've seen periods where financial sector stocks were added one after another for several adds in a row, and also where Tech stocks were added consecutively (several in a row as well). IMO, they were intentionally 'beefing up' those sectors.

*** All of this is my OPINION and NOT fact. This is based on dealing with the S&P indices for 5 years on a daily basis. I know the supposed 'committee' that picks that stocks but can't get any solid info from them to narrow down the criteria some more. The criteria I mentioned is from my own observations ***

Take care.
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