«It matters less than you think.»

Traders,

Recall there are three ways to construct an Index. One is to weigh each stock equally, so they all exert the same influence. An excellent example of this is RSP, the equal-weight S&P 500. Two is to price-weight each stock, so the most expensive carries the most weight. The Dow Jones Industrial Average is an example of this (DIA). Three is to market-cap weight, so the largest company makes the most impact. This is the way the S&P 500 is constructed.

Can you guess which is best? That is, which generates the highest return over time?

As it turns out, they’ve all behaved similarly. Indeed, over the past 15 years whether you’ve equal-weighted, price-weighted, or market-cap-weighted a large basket of U.S. equities, your returns have all hovered around the same number.

Slightly different paths. Same ultimate destination.

I suspect the future will prove no different. 

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Video of the Day: How to trade an In-The-Money Covered Call (PANW Example)

Watch Coach D. discuss the high probability of profit, ITM covered call on PANW (Palo Alto Networks).

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Chart of the Day: S&P 500 Index Comparison ($SPY)

This chart shows the past 15 years’ performance in SPY vs. RSP vs. DIA. The overall results have been slightly different, but nothing earth-shattering.

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Options Theory

Long Calls – ITM vs. OTM

Today we’re addressing the differences between buying ITM calls and OTM calls.

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Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

Cash Flow Club Replay

If you missed last night’s webinar with Coach Tyler Craig where he talked about Bear Call Spread or would like to watch it again, check it out here.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.

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Financial freedom is a journey

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