Tesla Inc. will officially join the S&P 500 on Monday, likely triggering a crazy Friday afternoon in the markets.
The electric car manufacturer will be by far the largest company by market value to ever enter the S&P, the most followed stock index. Tesla’s inclusion will prompt the dozens of index funds tracking the S&P to buy tens of billions of dollars in stock at Friday’s closing price in an effort to track the index as closely as possible. Due to the size of the company and the volatility of its stock, the addition of Tesla could ripple through the market in additional, unpredictable ways, traders said.
A spokesman for S&P Dow Jones Indices, which oversees the S&P 500, said the company had consulted market participants and communicated the addition to the market “well before typical index changes.”
Here are five things to watch:
1. Quadruple witches
Tesla’s addition to the S&P 500 coincides with quadruple witches, which takes place four times a year and refers to the day when options and futures on both indices and stocks expire simultaneously. These heavy volumes will boost liquidity and are likely to help facilitate the addition of Tesla to the S&P, traders said.