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What Are Spiders (SPDRs)?
Standard & Poor’s Depositary Receipts are known as spiders, or SPDRs. Managed by State Street Global Advisors, they represent an exchange-traded fund (ETF) made up of shares of a market sector or index.
SPY, which is commonly used interchangeably with the term SPDR, is the most actively traded ETF in the stock market in terms of volume. SPY is made up of all of the companies in the S&P 500 Index, and because it tracks the S&P 500, many investors consider it to be a key component of their overall portfolio. Not only does SPY track the price performance of the S&P 500, it also tracks the S&P 500’s dividend yields.
In addition to the S&P 500 SPDR (SPY), there are other spiders that track the performance of other market indexes or market sectors, which we’ll discuss below.
How Much Are Spiders Worth?
SPDRS trade on the American Stock Exchange. The S&P 500 SPDR trades under the ticker symbol SPY, and market prices change daily.
SPY trades at about 0.10 times the S&P 500, which means if the S&P 500 Index is valued at $4,000 or so, then the SPDR would trade around $400.
Why Do People Invest in SPDRs?
SPDRs are attractive investments for a variety of reasons:
- As ETFs, they exhibit a lot less volatility than individual stocks. In addition to buying and selling ETFs, you can also short sell or trade them on margin.
- Like all ETFs, which trade like stocks, they exhibit higher liquidity than mutual funds and can be traded throughout the day—unlike mutual funds, which can only be bought or sold after the markets close at 4:00 PM ET.
- Since they are made up of shares of hundreds of companies, they also add diversification to one’s portfolio in one fell swoop.
- In addition, they are also considered to be a great value, since they trade at prices that are fractional to the indexes they track.
What Are Spiders Made of?
SPY is an ETF that tracks the S&P 500 Index and, as such, it is made up of the 500 composites—both large- and mid-cap companies—that are included in the S&P 500. Visit SPGlobal for the current lineup.
What Other Kinds of Spiders Are There?
The trading web is full of many different SPDR species, but all are ETFs. The sector SPDRS are actually the S&P 500 composites categorized into 10 sectors:
- Consumer Staples (XLP)
- Consumer Discretionary (XLY)
- Energy (XLE)
- Financials (XLF)
- Health Care (XLV)
- Industrials (XLI)
- Materials (XLB)
- Real Estate (XLRE)
- Technology (XLK)
- Utilities (XLU)
Each ETF contains a range of 25–85 stocks found in the S&P 500 and can be traded throughout the day.In addition, there is an ETF called SPDR Gold Shares, which tracks the price of a tenth of an ounce of gold. State Street Global Advisors manage all of these SPDRs as well.
Are Spiders Dangerous?
Unless you are talking about the kind with fangs, SPDRS aren’t generally considered particularly dangerous. ETFs, which are made up of a basket of stocks, are inherently less risky than individual stocks. However, savvy investors will carefully examine index ETFs or SPDRs to see if they are overweighted in particular industries. Believe it or not, as of February 2022, six technology companies made up over 25% of the S&P 500! So, investors who allocate a large percentage of their portfolios to one sector may want to consider adding additional diversification.
What Is the Difference Between a SPDR and an ETF?
All SPDRs are ETFs, but not all ETFs are SPDRs. The SPDR family of exchange-traded funds is managed by State Street Global Advisors. The most famous SPDR (and one interchangeable with the term) is SPY, which tracks the S&P 500 Index.
What Is the Difference Between SPDR and Futures?
Trading at about 0.10 times the S&P 500, Spiders are a good way for individual investors to track the S&P 500. Compare them to how the S&P 500 futures trade at 250 times the S&P 500, or the S&P Mini, which trades at 50 times the S&P 500. However, TheStreet’s Travis McGhee explains why retail traders are starting to become more interested in what futures have to offer.
History of SPDRS
The first SPDR was launched in 1993 and was the first ETF to be traded in the United States. Its creation was spurred by the Black Monday stock market crash of 1987, when the Dow Jones Industrial Average lost 22.6% in a single trading session, mostly due to faulty trading orders. The Securities & Exchange Commission concluded that a vehicle for trading a basket of stocks at a time could have prevented such a massive selloff. Thus, SPDRs were hatched.
