$2.4 Trillion Of Options Expiration On Top Of Nasdaq 100 Rebalancing May Cause Volatility
Portfolio Pulse from The Arora Report
The Nasdaq 100 is set to undergo a rebalancing, which will see the weight of seven major stocks, including Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta Platforms, and Tesla, reduced. The change in weight will be distributed to other stocks in the index, with Broadcom, PepsiCo, Costco, Adobe, Cisco Systems, and Netflix among the top beneficiaries. The rebalancing, effective from July 24, is expected to cause volatility, especially as it coincides with $2.4 trillion of options expiration. However, Wall Street consensus suggests buying the 'magnificent seven' stocks on any dip caused by the rebalancing.
July 21, 2023 | 3:11 pm
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POSITIVE IMPACT
Broadcom's weight in the Nasdaq 100 will increase from 2.36% to 3.00% due to the rebalancing.
The increase in Broadcom's weight in the Nasdaq 100 could lead to buying pressure on the stock.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 100
NEUTRAL IMPACT
The Invesco QQQ Trust Series 1 ETF, which tracks the Nasdaq 100, may see volatility due to the rebalancing and options expiration.
The rebalancing of the Nasdaq 100, which the QQQ ETF tracks, and the coinciding options expiration could cause significant price movements. However, the direction of these movements is uncertain.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 100
NEGATIVE IMPACT
Apple's weight in the Nasdaq 100 will be reduced from 12.06% to 11.05% due to the rebalancing.
The reduction in Apple's weight in the Nasdaq 100 could lead to selling pressure on the stock. However, the Wall Street consensus suggests buying on any dip caused by the rebalancing.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 100
NEGATIVE IMPACT
American Express stock is being sold on earnings. It is a component of the Dow Jones Industrial Average.
The selling of American Express stock on earnings could lead to a decrease in its price.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 100
NEGATIVE IMPACT
Bitcoin is trading below $30,000.
The fact that Bitcoin is trading below $30,000 could indicate bearish sentiment in the cryptocurrency market.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 100