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How to Invest in Technology

Equity market bulls have none other than technology stocks to thank for this year’s upside with the sector outperforming its counterparts by an average of 45%. Depending on the index you quote, however, tech stocks either led to exceptional gains or barely brought the index back to unchanged on the year.

Source: dxFeed Index Services (https://indexit.dxfeed.com)

Tech Percentages

Knowing how much of an index’s exposure is invested in technology is more important than ever as the sector continues to captivate the everyday trader, but it’s not as straightforward as you might think. For instance, AAPL and MSFT make up 12% of the S&P 500 and half of its technology sector weighting, and these same two names account for 24% of the Nasdaq.

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High-flying biotech stocks, such as MRNA (up 260% in 2020), are greatly underrepresented in most stock ETFs and futures causing people to go elsewhere for their biotechnology exposure. Not to mention retail heaters like W, SHOP, and JD (up 270%, 175%, and 115% this year, respectively) that still don’t garner that much interest from traditional equity indexes.

Source: dxFeed Index Services (https://indexit.dxfeed.com)

Technology for Bulls and Bears

Small Technology 60 (STIX) simplifies things for the modern trader: 100% technology stocks with relatively equal exposure across tech companies in information, media, retail, and biotechnology. STIX gives roughly the same weighting to AAPL as it does MRNA, SHOP, and the rest of its components. Tech bulls can find potential upside in a product that lends greater equality to its   stock names, while bears can take advantage of a more well-rounded technology trade that could fall harder if tides turn.

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This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

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About Frank Kaberna

Frank Kaberna is the head content strategist at the Small Exchange. He produces everything from brochures to videos that inform on the Small Exchange’s products. After earning a mathematics degree from the University of Michigan, Frank traded interest rates at the Chicago Board of Trade. He then worked on the tastytrade Network as a content producer and on-air talent before landing at the Small Exchange.

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