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Looking at Market indexes
Hi again Mark.

Though not specifically on the topic of options, market movement does affect their pricing.

As I watch the markets each day the indexes (DJIA, NASDAQ, S & P) are almost identical tick for tick (a bit of an exaggeration here).

How is it that such a huge open market system can have 3 indexes that move in unison?  It seems so large that no entity should be able to direct the market


Hi,

Over time these indexes are not 100% correlated.  Nor should they be because the composition of each index is very different.  But it's always possible for them to move step in step for a short period.

If you look at the Russell 2000 Index (RUT or IWM) you'll see that this index is out of step and sometimes closers higher when the other indexes are lower (and vice versa).

I agree no that entity could, or would try, to move all those stocks in those indexes.  To me it's a coincidence when they overlap.  If there's a better answer, I'm sorry but it escapes me.

Mark


--
Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options
website:  http://www.mdwoptions.com
blog: http://blog.mdwoptions.com/options_for_rookies
Free eBook: http://www.mdwoptions.com/freebook.pdf