Tesla Jumps on Market Open - Expert Commentary - Dukascopy Bank
Tue, 17 Nov 2020 15:13:20 GMT
Source: Dukascopy Bank SA
At the opening of the US markets on Tuesday, the stock price for Tesla started the day's trading 13.19% or 53.14 USD higher than the Monday's close. The reason for this was the announcement that the company's stock would be included into the S&P 500 market index in December.
In general, the index captures the top 500 companies of the market by total value or market capitalization. Throughout the last years various investors have pushed the market capitalization of the Tesla's stock high enough for it to be included into this index.
In regards to why the stock price opened higher. There are a lot of equity traded funds, private funds, hedge funds, duplicators etc.. that mimic the S&P 500 in an effort to trade the market as a whole. If the structure of the index changes and includes Tesla stock, it means that these investors will begin to buy the stock of the company. Namely, demand for it grows.
Prior to the market opening, the traders of the stock futures market found the equilibrium price at the new level, at which the market opened on Tuesday.
In the meantime, there are no fundamental changes to the company.