S&P 500 Standard vs Micro


Explore the differences between S&P 500 Standard and Micro Index with this informative blog post!

The S&P 500, or Standard & Poor's 500, is a beloved index of publicly traded companies in the United States. It is the benchmark of the US stock market, and often used as a measure of an investor's performance for long-term portfolios. Many investors look to the S&P 500 as both a guidepost and a safe haven for financial stability in the US economy.

CLiK Trading Education Ltd
Blog post image descriptions

What is S&P 500?

Standard market investing is one of the most popular investments for knowledgeable investors as it’s a well-diversified portfolio. The potential for capital appreciation is strong, and it also provides a foundation for income growth as it is composed of a mix of large-cap and mid-cap US companies. The S&P 500 is composed of a wide variety of industries, and many consider it's composition to be a true representation of the US stock markets and the US economy as a whole.
CLiK Trading Education Ltd

Difference Between Standard and Micro

The S&P 500 futures contract and the S&P 500 Micro futures contract are both derivatives that are designed to track the performance of the S&P 500 index. They are structured to closely mimic the movement of the underlying index, and this relationship is maintained through arbitrage mechanisms and other factors, despite differences in the number of buy and sell orders at various price points in the two markets. Here's why they tend to move in sync:

CLiK Trading Education Ltd

1.    Arbitrage Opportunities: Traders and arbitrageurs actively monitor the price differences between the S&P 500 futures contract and the S&P 500 Micro futures contract. When discrepancies arise, they can exploit arbitrage opportunities by simultaneously buying and selling the contracts to profit from the price differential.

2.    Market Makers: Market makers in the futures markets play a crucial role in ensuring that the prices of both contracts remain closely aligned with the spot price of the S&P 500 index. Market makers continuously provide liquidity by offering to buy and sell contracts at competitive prices. They adjust their quotes to minimize any pricing differences between the two contracts.

3.    Market Forces: Even though the number of buy and sell orders may differ between the two contracts at specific price points, the overall supply and demand dynamics in the futures markets tend to keep their prices in sync with the underlying index. Market sentiment, news events, and economic data releases impact both contracts and can drive their prices in the same direction.

Discover the power of micro investing in the S&P 500!

In summary, while the number of buy and sell orders may differ between the S&P 500 futures contract and the S&P 500 Micro futures contract at any given time, the relationship between the two contracts is maintained through arbitrage mechanisms, market maker actions, and overall market forces. These mechanisms work to ensure that both contracts closely track the performance of the underlying S&P 500 index, leading to a high degree of correlation between their price movements.