Can you explain to me what a "point" is on an index? What monetary value does one point represent, or does it work that way? (November 3, 2001)
A point is the increment by which an index moves up or down, and is how the index is valued. Basically it is not something that you would buy an option on and then want to convert it to dollars. For instance, if you were in OEX options, you could not convert them to some fractional shares of each stock on the S&P 100. You can, however, buy index based securities such as the QQQ; you can own options on it and you can own a share of the QQQ. In that instance, 1 point equals $1 as far as the security is concerned. As far as calculating what makes up a point, each index is either weighted or unweighted. The Dow and Nasdaq are market cap weighted. Thus, the bigger the market cap, the more that stock impacts how many points the index will move based on that stock's movement.
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