13 facts about index market that you may not know – Part 2

• 7.  While most indices are available in the market for major economies, it is impossible to find those similar benchmark in smaller emerging economies.  Morgan Stanley Capital International (MSCI) has created some country-specific indices, including those for countries that are smaller. The firm states that the indices capture 85% of the countries market and accurately reflects the economic diversity of the market. For more information, refer to www.MSCI.com.
• 8.  Not only are indices created to track groups of stocks, they are also available to track yields for key Treasury bonds.  The Five-Year Note Index ($FVX), the Ten-Year Note Index ($TNX) and the Thirty-Year Bond Index ($TYX) are used by professional traders and investors to measure loss and profit from changes in interest rate.  These indices only represent the yield of various government notes and bonds.
• 9.   QQQQ, Diamonds and Spiders are the most important exchange-traded funds (ETF) for you as a trader or investor to understand in depth. They respectively track the performance of the 3 major US equity indices: NASDAQ ($NDX), Dow Jones Industrial Average ($INDU) and S&P500 index ($SPX).  They are the major ones for you to follow and make decision to trade, hedge extremely liquid market.  These 3 ETFs are the most-heavily traded with very active underlying contracts.
• 10.   There is an investment product (ETF) that permits you to buy the whole basket of stocks in one order and it is called Holding company depositary receipts or HOLDRs. The old Merrill Lynch created this vehicle and it trades on the American Stock Exchange (AMEX) on round lots.  Every 100 share represent a specific number of stocks in different companies and you as an owner can break apart the ETF into individual stock.  This makes HOLDRs as truly unique ETF. However, not all ETF requires purchase of blocks of 100 shares.
• 11.   GLD – Gold shares Exchange traded fund, is another ETF but it is different from other ETF or indices because it actually holds Gold bullion.  It as a result a fair accurate reflection of the price of gold.  It is unique from other gold tracking indices because it doesn’t include mining stock and other precious metals.  ETFs that hold oil and silver are also available.
• 12.  By October 2008, Semiconductor HOLDRs (SMH) is one of the most active sector ETFs.   It is wise that you track this to monitor and find really liquid index proxy.
• 13. CBOE offer option contract to trade on all broad-based indices.  Many of them are now available on other exchange than the CBOE exchange.

Category: Options Trading