The stock market is an index of a number of companies. And it’s largely weighted by market cap. That index can change all the time, and for any number of reasons. One reason may involve the bankruptcy of an index member company.
That’s the case with the S&P 500. First Republic Bank is no more, having been seized by regulators and having its deposits sold off. But it’s the S&P 500, not the S&P 499. The index needs a new member.
Traders are betting that Blackstone (BX) may fit the bill. It’s also a financial company of significant size. But it’s an asset manager, not a bank. Blackstone’s biggest issue is that its assets have taken a hit over the past year as interest rates have been moving higher.
With shares down 15 percent compared to the past year, buying ahead of the end of the interest rate hike cycle could be a solid play. And that play could be juiced by the billions in buying pressure if Blackstone is added to the S&P 500.
Action to take: Investors may like shares here. The company is a leader in its space. It’s also a dividend growing play, with a 4.9 percent yield at present.
For traders, any inclusion in the S&P 500 and fund buying will likely take place in a few months. The August $90 calls, last going for about $6.80, offer mid-double-digit returns on a move higher in Blackstone shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.