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LESSON THREE
Index & Beta Trading
• Types of Indices :
– Price Weighted – Price is the only component to determining
the value
– Capitalization Weighted – Market Cap is another component to
overall value
• Dollar Index –
– Composition:
• Index Futures – A futures contract that represents a particular equity
index (S&P 500, DJIA, etc.) and can be utilized as both a speculation
and hedging tool.
• Beta –Beta – Capital Asset Pricing Model Coefficient that is a past
indication of how volatile a single stocks returns are to an index. A
beta of 1 is similar to an index return while above offers “potentially”
more volatility and reward.
In low correlation
environments pick stocks.
High, go to the index
/GC (GOLD)
6/8/2010
6:00:00