I follow investing a little bit and all I see the memes about are the infamous SPY stock and how it’s either been going up or down. Why is it important and why is everyone obsessed with it?
In: Economics
Calls if you think stock will go up, Puts if you think stock will go down. You either gain money or lose it all so it’s essentially gambling but with stocks. 1 contract = 100 shares.
Adding to everyone else… call and puts are contracts with expiration dates that you can sell or buy. Calls are saying you want to buy 100 shares of a stocks at a certain price if it lands at the price you chose, if it doesn’t then it’s worthless. Puts options are like insurance on your stock, so if you have 100 stocks and the price falls below a certain price. You can force the person that sold the put to buy your stocks at the strike price even if the stocks go even lower.
In this case or context I should say. People are trading premium on the contracts, regardless of if the stock lands on the strike price. It’s cheaper than buying and selling stocks that’s why people are doing it. More risky in that you can lose all your money, or gain more than buying and holding stocks.
Mostly lose though…
SPY is an ETF (exchange traded fund) that tracks the S&P500.
The S&P500 is an index that consists of a collection of the top 500 companies weighted by worth of the companies (If apple contributes 5% to the collective worth of the companies in the 500 companies, 5% of the S&P500 is made up of it).
The S&P500 has historically been a good measure of how the US economy is faring. SPY is an ETF, meaning it is a stock that the exchange makes sure is backed by company stock based on proportions of the S&P500.
Buying calls and puts on SPY is just an r/wallstreetbets meme.
It is an ETF which means it’s not a stock in a company exactly, it is a piece of a collection of many stocks. This is safer because although some companies succeed and some fail, overall the value of the market as a whole will go up, therefore it is a good medium to long term investment. Prices are low right now for obvious reasons so it’s a good time to buy in general. There are many benefits to ETFs but you’ll have to read more on that outside of here.
SPY is the largest and most traded ETF in the world. Put simply, it’s a fund that owns a small % of most of the S&P 500 companies, which are the 500 biggest companies in the United States. Because it’s so diversified, and because this diversification represents a significant cross-section of the US equities market, it’s a very popular ETF to trade.
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