Ten Benefits of Trading the S&P 500 Index:
- You do not have to diversify with multiple stocks for equity exposure, the index is already diversified.
- The risk of any one stock having something catastrophic happen will not really hurt your trade. No one stock has more than a 3% weighting.
- The S&P 500 is much harder to manipulate than individual stocks due to its size and volume of trading.
- The derivatives of the S&P 500 move much more smoothly around support and resistance areas than most individual stocks.
- The S&P 500 has its own survivor bias, replacing its holding of falling stocks with new ones that are growing in market capitalization.
- You do not have to deal with earnings surprises like in individual stocks.
- Due to the indexes much lower volatility, you can trade larger position sizes with much less risk.
- Traders can amplify their positions and movement in the index by using mini or standard size futures contracts, or leveraged Equity ETFs. $SSO $SDS $UPRO $SPXU
- The $SPY and $SPX options are very liquid with very tight big ask spreads.
- With this index, you can trade the trend of the stock market itself, which is a much broader bet than any one company or sector.