September 28, 2011 | In: General

What Is a Spider in the Stock Market?

When I first started trading stocks, I shrugged when I heard the term spider. I had no idea what it was, and yet I felt ashamed to ask my friends because it seemed to be something taught to investors in “trading stocks 101″. In any case, I did my research, and then I discovered that a spider means “SPY“, an ETF stock that is named SPDR (hence the name Spider) S&P 500. This stock is tied to the movement of the S&P 500 index, so if the S&P 500 goes up, the stock goes up, if it goes down, SPY will go down (by nearly the same percentage – for example, yesterday, SPY was up 1.15% and the S&P index was up 1.07%)…

SPY is a stock in and for itself, and unlike other ETF stocks, it pays dividends and it has a P/E that is associated (again) with the performance and the yield of the S&P 500 index. There are just over 680 million SPY public shares, and the current yearly dividend is just over $2 (SPY is currently trading at $117 – by the way, I think SPY is currently very cheap). SPY can also be shorted.

The average volume on SPY is huge, and it’s about 300 million shares/day. It is one of the most traded ETFs in the world (maybe the most traded? I will check later…).

My personal opinion about SPY is that it’s a safer stock than a company stock, as it reflects the performance of 500 companies, and not just one. So if one company has a huge swing in a certain day, SPY will be affected, but not much. So your loss (and profit) from this swing will be minimal.

By the way, in case you’re curious to know, SPDR stands for Standard & Poors Depositary Receipts.

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2 Responses to What Is a Spider in the Stock Market?

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What Is the Most Traded ETF? « Fadi El-Eter

October 6th, 2011 at 6:06 pm

[...] my article on the definition of a spider, I mentioned that I wanted to know whether SPY was the most traded ETF or [...]

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What Is the Most Traded Stock? « Fadi El-Eter

October 13th, 2011 at 2:56 pm

[...] immediately I suspected SPY simply because a volume of almost 300 millions shares/day is a lot (there are smaller mature [...]

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