Happy Friday, traders…
Jeff here.
The S&P 500 is the most widely-followed stock market index in the world, representing the performance of 500 of the largest companies in the United States.
One day each quarter, the S&P 500 committee reviews the index and “rebalances” it to ensure it accurately reflects the U.S. stock market.
And that day is today…
Companies will be added or removed from the index based on market capitalization and sector representation.
On the one hand, if a company has grown considerably in the past quarter, it might be added to the S&P 500.
On the other hand, if a company has lost significant value or market share, it could be removed from the index.
This process is necessary because the stock market is constantly evolving, and the S&P 500 needs to stay relevant to the economic landscape.
While these changes may seem minor, they can create ripples in the market that lead to shifts in stock prices and trading volumes…
And that’s where major money-making opportunities pop up for savvy options traders like you and me.
Mark my words: There are going to be massive moves today caused by huge institutional flows that happen on the back of this rebalancing.
When I was a prop trader on Wall Street, I always had rebalancing days circled on my calendar in thick green ink.
Every year, a few days stick out when I know that there’s an incredible amount of money to be made — and this is one of those days.
Naturally, I’m putting on some huge trades today to hold over the weekend.
So, if you want to learn how to use options to take advantage of these crazy market moves…
Now is the time.
TODAY, September 20 at 10 a.m. EST — I’m hosting a Special Burn Notice Event to review my rebalancing trading plan in detail.
DISCLAIMER: This isn’t your typical trading webinar. I’m pulling back the curtain on one of the most under-the-radar strategies I’ve ever developed. I don’t share this with just anyone…
But space is limited, and this is your LAST CHANCE to sign up … Click here to reserve your seat!
In the meantime, I’ll show you how the rebalancing of the S&P 500 works — and how you can benefit from it…
Why the Rebalancing Matters for Traders
When a stock is added to the S&P 500, it often experiences a price surge.
This is because mutual funds, exchange-traded funds (ETFs), and institutional investors that track the S&P 500 are required to buy shares of the newly added companies.
For example: When Tesla Inc. (NASDAQ: TSLA) was added to the S&P 500 in December 2020, its stock surged 70% in the three months leading up to its inclusion. Imagine if you had caught that move…
Similarly, when a stock is removed, the opposite happens — funds sell off their shares, and the stock’s price often drops.
These price swings will create opportunities for us to make profitable trades today.
But how — and at what time — can you take advantage of these moves?
My #1 Strategy for Trading the Rebalancing
Timing is critical when trading options around S&P 500 rebalancing events.
Once an announcement is made, many traders will jump in quickly, causing prices to react almost immediately.
Additionally, volatility can work against you if prices move in the opposite direction of your trade.
That doesn’t mean it’s impossible to catch the moves — but it means you need to focus on your timing.
Which brings me to my #1 strategy for trading the rebalancing…
It all comes down to one of the most powerful discoveries I’ve ever encountered in the stock market…
Over the last ten years, the volume of assets managed by passive equity funds in the US has grown dramatically, exceeding $11.5 trillion, based on Bloomberg Intelligence data.
This increase has led to a concentration of trading activities towards the end of the trading day.
Active traders flock to this liquidity, creating a “perfect storm” of increased end-of-day trading activity…
If you only pay attention to one chart in your trading career, it should be this one.
This chart shows how much you could’ve gained by buying the close and selling the open on the SPY over the last 30 years.
You would’ve made a whopping 812%…
But if you did the opposite — buying the open and selling the close — you would’ve actually lost 10%.
This phenomenon occurs because Wall Street follows different trading rules than you and I do.
As banks, they’re legally required to keep enough cash on hand to fulfill their customers’ withdrawal requests.
This forces Wall Street to free up an estimated $8.3 billion in cash every single day. And they do this by selling stocks.
When I figured this out, I started formulating a strategy to exploit this little-known weakness … something I call Burn Notices…
And the best part is, this strategy doesn’t require a large amount of money.
In fact, most of my Burn Notice alerts only cost between $2.00-$3.00 in options premium.
You can put as much (or as little) as you’d like into these Burn Notice opportunities.
Here’s how they work:
- 🔥 Step 1: Wait for the ‘Burn Notice’ to be issued
- 📉 Step 2: Enter as the share price drops (or surges) into the close
- 📈 Step 3: Wait for the stock to bounce (or tank) the next day
- 🎯 Step 4: Sell at my target exit price
It’s these embarrassing cash bleeds from unprofitable institutional trading — combined with large end-of-day withdrawals — that trigger these consistently predictable moves.
And today, I expect to see some of the largest and most dramatic Burn Notices in recent memory…
But if you want to see exactly how I plan on using Burn Notices to profit today, you need to sign up for my special event…
TODAY, September 20 at 10 a.m. EST — I’m hosting a Special Burn Notice Event to reveal my trades for the day.
But spots are filling up fast, and I’d hate for you to miss out on this rare opportunity. Click here to secure your seat now — before it’s too late!
I’m excited to see you there,
Jeff Zananiri
