Apple & Microsoft Confound Nasdaq 100 Rebalancing Expectations

Tuesday, May 3, 2011

When the Nasdaq 100 rebalancing was announced before the April 5 stock market opening, the expectation was that opportunities might arise as we approached the May 2 implementation, based on April 29 closing prices.

The best possibilities seemed to be an Apple (AAPL) sell-off (its allocation was being significantly decreased) and a Microsoft (MSFT) run-up (being significantly increased). The strategies were straightforward:

* Use price drop to build or expand an Apple position.

* Use price rise to reduce or liquidate a Microsoft position.

* Hedge: Buy Microsoft and sell Apple (then reverse the positions when the rebalancing effects occurred).

However, the opportunities didn’t arise. In fact, the reverse occurred…

This article is posted on SeekingAlpha.com.

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