Tesla Slides in First Day of Trading on the S&P 500 Index
(Bloomberg) - Tesla Inc. shares fell 6.3% in premarket trading on Monday as the electric vehicle maker makes its trading debut in the S&P 500 index.
Futures contracts on the S&P 500 fell 2.5% after European stocks fell after several large countries suspended travel from the UK on concerns over a new strain of Covid-19.
Tesla has catapulted 731% this year in anticipation of historic inclusion, making it the largest company ever to be included in the benchmark. The EV pioneer will also join the S&P 100, and oil and gas company Occidental Petroleum Corp. Replace that fell 12% before entering the market.
Read more: Tesla's road to the S&P 500 was a wild ride, as these graphs show
Traders who had spent most of the year propelling Tesla shares up in anticipation of rising demand from index funds peaked Friday when frantic buying by passive managers pushed stocks up nearly 5% at close . At the end of the day, Tesla shares closed at an all-time high. More than $ 150 billion in Tesla stock traded on Friday prior to inclusion in the index.
Read more: Hungry Index Funds Cram Tesla in the S&P 500 at a record high
"There is a strong priority for positive returns on stocks prior to inclusion in the S&P 500 and after the announcement, but very limited precedent for short-term out-performance after inclusion," wrote Toni Sacconaghi, analyst of Sanford C Amber in a note earlier this month.
Market strategists divided how the addition of the notoriously volatile stock would affect the benchmark. According to Susquehanna's quantitative derivatives strategist Souhow Yao, the inclusion will have a limited impact on implied volatility, and if Tesla had been added a month ago, volatility would actually have decreased for the S&P 500.
On the flip side, Steve Sosnick, Chief Strategist of Interactive Brokers, said that Tesla's historical volatility suggests daily movements of about 4% up or down and at its current market value it can move the index by about 2 points.
(Updates the share price throughout the course.)
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