USA 500 Futures CFD, based on the S&P 500 E-mini futures. S&P 500 index is a leading indicator of large-cap US shares.
Technical Analysis S&P 500 Futures
What is a stock market index?A stock index is a performance indicator or measure of a country's economy or of an industry sector. For example, Nasdaq 100 represents the largest 100 companies traded on the Nasdaq Stock Exchange. If, on average, the share price of these companies goes up, then the index will rise. Conversely, if they fall, the index will drop.
Most main indices are based on a basket of shares and are thus considered good measures of the current market sentiment. When you take a position on an index, you are effectively investing in the performance of these shares and thus avoid factors that influence the performance of individual companies (such as a lack of market volume). For a full list of index futures CFD offered on the Plus500 platform, click here.
How does leverage work in Index CFDs?By trading index futures contracts with leverage, you can multiply the value of a trade through the use of borrowed capital, and as such, you can increase the potential profit or loss to be realised from the trade. The available leverage for index CFDs on the Plus500 platform is up to 1:300.
How do you start day trading on the stock market index?Follow these steps to start trading stock CFDs with Plus500:
- If you don’t already have a Plus500 account, open a Trading Account Here.
- Complete your account registration and documents verification, then deposit funds.
- To search for a specific index, click into the search bar and type the name or symbol.
- Consider placing stop orders in advance: you can define the level of profit you would be happy with and/or the level at which you would like to close out the position should the trend turn against you.
- Open a trade.
S&P 500 Index – Standard & Poor's 500 IndexWhat Is the S&P 500 Index?
The S&P 500 or Standard & Poor's 500 Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The index is widely regarded as the best gauge of large-cap U.S. equities. Other common U.S. stock market benchmarks include the Dow Jones Industrial Average or Dow 30 and the Russell 2000 Index, which represents the small-cap index.
S&P 500 Index Construction
The market capitalization of a company is calculated by taking the current stock price and multiplying it by the outstanding shares. The S&P only uses free-floating shares, meaning the shares that the public can trade. The S&P adjusts each company's market cap to compensate for new share issues or company mergers. The value of the index is calculated by totaling the adjusted market caps of each company and dividing the result by a divisor. Unfortunately, the divisor is proprietary information of the S&P and is not released to the public.
However, we can calculate a company's weighting in the index, which can provide investors with valuable information. If a stock rises or falls, we can get a sense as to whether it might have an impact on the overall index. For example, a company with a 10% weighting will have a greater impact on the value of the index than a company with a 2% weighting.
The Widely Quoted S&P 500
The S&P 500 is one of the most widely quoted American indexes because it represents the largest publicly traded corporations in the U.S. The S&P 500 focuses on the U.S. market's large-cap sector and is also a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading.
Limitations of the S&P 500 Index
One of the limitations to the S&P and other indexes that are market-cap weighted arises when stocks in the index become overvalued meaning they rise higher than their fundamentals warrant. If a stock has a heavy weighting in the index while being overvalued, the stock typically inflates the overall value or price of the index.
A rising market cap of a company isn't necessarily indicative of a company's fundamentals, but rather it reflects the stock's increase in value relative to shares outstanding. As a result, equal-weighted indexes have become increasingly popular whereby each company's stock price movements have an equal impact on the index.